try to engage the west in negotiations that's how i read the whole tehran research reactor chapter in all of this. i think that ahmadinejad tried to use that to develop an opening to washington to vp five plus one but then it really fell afoul of the iranian domestic politics. i think he might have tried to revive the idea later on, but again everybody jumped all over ahmadinejad and he may only be recovering from that now, so it's not that sanctions have not pushed iran towards negotiations , they get pushed

iran towards negotiations over the years, but frequently it's been that domestic political situation in iran that has needed an unsustainable for iran to engage in these negotiations. >> we have a question from the gentleman in the front. did a mic here. the gentleman just behind you. right here, please. >> very interesting conversation. i found the conversation about the choreography of creating a consensus very interesting but at the end of the day it is a choreography coming to consensus on the tactics sanctions. what is the choreography and the conversations are being had to actually come to consensus on what would be an acceptable solution? for instance, france has from the outset been skeptical about the idea of enrichment on the iranian soil. other p5 states of a different perspective. we have detected without a

consensus with a solution would be? and if so, is it just endless tactics or is there actually a strategy behind this? >> thank you. every good question. >> i would like your opinion from the national perspective, or the ones you the present. how do you think the u.s. policy has worked so far? how has the obama administration handled this difficult issue? has it been a clever combination of engagement and sanctions and sabotage, or have there been constrained by their own domestic political considerations that they've been unable to carry through fully on any one of the dimensions of this problem? >> thanks. there was a question towards the back and then i will take one from the gentleman here. thank you. >> thank you. jim cramer. i would like to ask francois if you anticipate the new sanctions

from britain and france will be adopted throughout? >> in the european union. i thought that can't be quite right. but after close >> it is a factor select media had an interesting angle there. let's go back to the panel. francois, there's a number of questions about the choreography that you laid out and the strategy rather than just tactics. there's a question about broader adoption throughout the e.u., and then i think what might be a difficult question to john is technically with the u.s. government but if you can take a question about how the policy from the other advantage point. francois, we will again begin with you. >> the question is good.

the strategy initially was the sanction. the sanction had been the strategy from 2003 to 2005. since then iran was rapidly refusing, adamantly refusing. i remember in the negotiation we were very uneasy and we wanted to put in [inaudible] the conclusion was june, 2005. so we wanted to request a suspension and iran opened the window to jump from the window to make some sense now we are going to come back to tehran with that. then we said all right we have a take on the negotiation to move in and we may be meeting at ground level so now we can jump.

[laughter] >> so that was the objective and that was the problem. today with the strategy goal i think everything evolves and we are not thinking about the kind of situation we have. it would not be professional, so we are thinking what should be our goal today? we still officially are in suspension. now the reflection going around have been set least two years in a slightly more broadway from the french point of view as you eluted to but in a more broad way how to make sure that no military nuclear program in iran week negate the right to use.

it is the right from the npt, and so in the broad sense of the term this would be the strategy of objective suspension about how to make sure that what iran -- that there is no military program in iran. about the other question which was about the difference in the u.k. sanctions, yes, the answer is yes. the 14th of november on account of the e.u. there is the international concern of the nature of this nuclear program for the cooperation of the e.u.

by demonstrating a willingness to engage seriously in concrete discussion and confident steps as proposed by higher e.u. press. the come to conclusions inviting it to prepare new measures against iran to consider possible measures and we are -- two days ago we said it is ongoing and a possible additional measure and we already updated the individuals of the council of ministers on the first of december as a first steps of the answer was yes we were not necessarily informed of the wording which would be used by the british prime minister of public but we are working together about what can be done naturally at that level and as you know, we have already taken some additional measures after

the plot. we have also submitted sanctions to the people involved. by the way coming year but had already sanctions so we had one and we are considering the new assumption by the member state [inaudible] >> thank you. on the whole question about u.s. policy, how effective does it look from the perspective of china? >> first of all, china does see the u.s. policy on iran has certain leader of being delivered an intentional of cooking up the tension. and since the revolution 1929 was just passed last year, china

was quite surprised, might be too big a word, so soon the issues have come back again and just like russia there's quite a sense of anger from the chinese perspective. and if you look to the comment from the chinese analysts, they do identify the linkage between the report which was the believe is the creation, and they also pointed out that some of the wikileaks have a model that says the position is the same as the united states on the nuclear issue. so there is a sufficient from china this current tension was deliberately brought up. on the issue of of a global solution, the position is we agree on the goal. we don't want -- we want to have nuclear weapons but we disagree on the approach.

the western countries sanctioned but china doesn't agree. china wants the negotiations and dialogue coming and coming from the chinese analyst is you like democracy, right? this is democracy of the international relations. and we could disagree and in the and we negotiate. so, for the consensus and the solution i think it is exactly because there is no consensus on the solution that everyone is focusing so much on the tactics. but that is the reality. so, the answer to joe's question is the u.s. policy is not seen in the same terms as we are obviously thinking it has not been effective on the chinese perspective because they see something else behind the policy. >> china always emphasizes the

sanctions have members to give up the nuclear program and will not work. >> how different is the russian view? >> i think in general moscow has been pretty pleased with washington's iran policy. since the obama administration came in. and it's only been in the last six weeks really since the servicing of this alleged plot against the saudi ambassador, and then after that, the early surfacing of the iaea report that moscow has not been happy with what we are giving. the feeling i get is they thought they were being rolled without being consulted, and really the russian foreign ministry statement almost flat out said that they want to undermine russia's's role in the whole process by the time obama

and medvedev met in honolulu the scene to smooth things out, and then i think russia got an iaea board of governors states that it like. it mentioned all of tehran's failings and the international concern but that also had some on iran -- some iran reaching back to the iaea trying to deal with inspectors suggested maybe they are turning the corner on this now. and on the sanctions, again, in a sense russia can have its cake and eat it, too come it would prefer that all these sanctions be approved in the security council and therefore subject to the russian veto.

but on the whole subject of the sanctions against iran, we have so many rounds of non-security council sanctions sanctions, unilateral sanctions that russia has gotten used to it coming and i think it just uses then add points to say listen, you're just asking for it. this stuff is not going to stop so come play ball. work with the iaea. >> let's take two more questions. in the front and this young gentleman back here. and i'm sorry to everyone else because we will have to move into lunch and then we will come back quickly to the panel. >> thanks. garate mitchell and i write the mitchell report and i want to ask a question this way. shortly we are going to hear from the national security adviser for the obama administration who's going to come spend an hour here

presumably if the subject of today's meeting had been what to do about new zealand, he wouldn't be spending in our -- >> do we have something on new zealand? [laughter] >> so, one can assume that on mr. donilon's short list, iran is right up near the top. and what i want to ask you is if we imagine that every monday morning at 7 a.m. greenwich time his counterparts in russia, china, france and germany held a five minute phone conversation to compare their short lists, the three things, the three or four things i worry about every day and most nights the first part of the question is is iran on everybody's list, short list or not, and be, what are those three or four things i worry about every day?

>> the question on your panel about whether the u.s. and israel were kind of overreacting when they didn't think we have quite got a definitive answer to that. the young gentleman here please if you could introduce yourself and ask a question, thanks. >> my question was about china. china plays a very important role and you pointed out the relationship, this, or the bobos relationship it has put to elon as far as the economic growth but it also has an economic relationship with israel. i don't know if it is as robust as it is with europe, but why hasn't china played a stronger role in negotiating and being a major negotiator with israel and given that they are more rational and neutral in the

situation? >> very good question more broadly perhaps you can play this out into the middle east. i mean, china has important interests not just in energy from iran itself but from the gulf more broadly as welcoming and china has relationships not just with israel but saudi arabia and other countries, so perhaps in answer to that question for you can think a little bit more about how china. so if we could turn to all of you on the panel now you can also give the things you thought you might not have been able to get across and then we will wrap up for lunch. so again, on this question of china. >> first of all, your question is whether the three, four prairies for the chinese national security china is that

the national security like that, but first the domestic issue. domestic issue is always more important than foreign policy issue and has gone to war on the chinese border, and for the foreign policy, the priority for the chinese national security team is always the united states. its u.s.. so, for example in the past weeks china has been most were completely absorbed into this u.s. and southeast asia and the proposal by the united states is regarded as a u.s. conspiracy to replace chinese the five economic leadership in the region and what i u.s. is doing with our country's and a pack and the a e.r.a. i.t. gabus relations to both both to the

country's to come back to southeast asia and campaign china. and i would say that the u.s. is always china's national security priority. and the issue on why china hasn't played a bigger role in the mediation between israel and iran, well, first of all china for the longest time, the longest term might be too long but the reform and opening of especially in the past decade doesn't see itself as a global power. china sees itself as an original power and gradually developing this global reach. why we have seen them having the out source of the problem in the global engagement in africa and in southeast asia and other continents as well. so, for china is first of all domestic and second its periphery and of course the u.s. is always an important issue, but in terms of middle east,

although china regards middle east has its grand periphery it is now china's's core national security interest. so that explains why china doesn't get too involved in the middle east struggling because china wants to keep as neutral and outside rule rather than get its hands dirty. if it gets into negotiations between eastern iran like you pointed out, china has economic and political relations with both countries, then how is china going to pick a site? so for china, the best strategy is to leave the nest to the united states and the western countries, who love to get involved in this whole mess, and will quietly develop and reinforce our economic and political relations without the countries in the region. so that is where china is a strategic choice. >> did any of that defense in the arab spurring change that

because obviously china tried to stay away from it but also got criticism for not making a decision. >> china certainly -- welcome the impact of arab spring on the chinese government, first of all, is just politics with it is the arab spring going into china, and china also has the spring in beijing which caused headaches with the chinese senior leaders. but in general the case of libya certainly talk china a lesson that china will have to at least think about developing better relations with the opposition's in these countries because the domestic politics in these countries are so unpredictable and china always peeks inside with the government like in libya's ks and always sided with ghadaffi then someday when there's a change within the country and the chinese national

interest cannot be protected so china's approach and perception and lessons learned of the libya case is how to have better relations with different factions, different political players within a certain country but not necessarily on the broader regional perspective. >> thanks. francois? >> on china i agree china is 1i discussed with my chinese colleagues in the u.n. they raise the interest of china better served by remaining political. we don't want to be involved in the mess of having to take sides and this is for an issue which is not at the core of our interest on the middle east is we have to be in the talks and

leading the approach of the international community on iran it's up to russia and nato and this is i think a very clear and understandable concept. in the mind of the european leader they can speak only for ashton and spoke about foreign ministers but the issues which have been always of the top is still the middle east peace process because it's probably the most difficult issue and the issue where the european union as you know the member has a specific responsibility, then you know why, because it is a neighborhood issue. it is a key issue for you

because of israel but it is also a neighboring issue for us, so we have the specific aspect first at the sea border region. after that i think probably or even before that time we should have a new u.s. summit next week. the main issue would be the economy, the economy and the economy. if we have time the middle east peace process with china and russia because the strategic reasons the specific interest with europeans and after that may be iran but only after. >> i don't think it is on its own in the short list that he or she would look at first thing in the morning but i think it is in our interest in the iran and israel's interest in the iran and the european public interest

in iran that continually bumps the problem up several notches in the list of priority issues that moscow has to worry about. in general also i would like to make the point that in moscow it used to be they thought the problem dealing with iran was the conflict between the u.s. and iran that we just couldn't sort it out, but especially over the ahmadinejad years most analysts in moscow think the problem is in tehran itself in the nature of iranian domestic politics. there is just no way to get a consensus to do a deal with the west at this time given the viciousness of the politics in tehran. and ahmadinejad has tried once

or twice to run with the ball coming and he's basically then cut off at the knees with all of his opponents within the various factions on his right and left in tehran. >> so russia doesn't necessarily see the u.s. at this point in the conclusion? >> not at all. >> that's certainly something to work with. well, i think we better conclude this panel so you can all grab some lunch and get back to your seats. we have half an hour now to grab a sandwich. thank you very much and we will see you back here. [applause]

[inaudible conversations] we will be back at 1:00 eastern at the brookings institution in their discussion on the iran's nuclear program and no clear sanctions. just to let you know that the live coverage on the c-span networks this afternoon president obama is in new hampshire speaking this hour in manchester and that is life. >> miami was the center stage.

it's where the cia came to recruit the human x files to eventually participate did in the invasion of cuba. after she came into power, many of the people who didn't like him very much fled cuba and where they fled to was mainly right here in miami. >> still bedevil's american life. of course the election of the first black president was a landmark shows there has been tremendous change in american racial attitude. had there not been that change, there would be no hope of prevailing. >> in the presidential debate is critical that it's harder in that situation that you've got to be call me enough to where you can listen and make a split-second decision. like what do i do now.

former vice president cheney says he will support any military action to the obama administration takes against iran in an interview with "the wall street journal" ceo counseling washington. she also called iran, quote, a world leader in state-sponsored terrorism citing heightened threats against the u.s. and israel in the recent years. >> mr. vice president, welcome. [inaudible] so, during your eight years in office i recently read your memoir and one of your main preoccupations after line 11 was preventing another attack on the united states and defeating the terrorists enemy. you left office not having had another attack and now we have had three years of succeeding administration which was highly critical of your approach.

and we have had three years now to see how well they have done. what marks would you give this administration in fighting the war on terror? how successful have they been? >> well, i -- interesting question. [laughter] certainly they have done some things right. the death of bin laden, for example, the use of drone attacks going after the leaders of al qaeda and so forth with the predator system that we've developed and have used originally. i think that has gone reasonably well. a lot of that is in the hands the president had to make a couple of decisions. i don't think they were that difficult and we would love to have had the opportunity to do that ourselves. >> you don't think the decision to actively pursue bin laden inside pakistan that wasn't a close call? >> i think -- i don't think it was a close call. i think it was it clearly needed

to be done, and while there might be some friction associated with it, they shouldn't have been surprised at all at the possibility that we would do that if we found that he was in pakistan. my concern has been as i look at i think they have an appropriately characterized what they inherited from us. it would have been nice if they said yeah we benefited from what the prior administration did by way of interrogation and developing these original leads that ultimately put us on bin ladens's trail, but set that aside the politics. the fact of the matter it's been policy. i was very upset when we get talks by the justice department about prosecuting the generals who carried out of our policies and the enhanced interrogation area that backed off since.

that's good and sound. i worry that we do not have now at present the capacity to interrogate high-value targets. i think that program has been shut down. if there has been a replacement put in place i don't know what it is. there is a rumor around town that the quick announcement of the success over bin laden by the white house in effect negated the a opportunity to take the intelligence that was collected at the same time that bin laden was captured, and they use that to follow-up with the perspective future attacks. that is to say one of the ways we've always benefited from the program is when we took down a target's zarqawi for example, that we were able to capture hard drives and a lot of intelligence that could be quickly exported to run out several days worth of effort

against the terrorist organization, and the suggestion has been made that they announced so quickly the result of the original raid that there was not an adequate opportunity to export all of that intelligence. >> if you look at the policies of this administration pursued, you mentioned interrogation, which may be an exception that guantanamo is still open. military tribunals of enemy combatants being pursued. state secrets doctrine maintained. you have the drone program if anything has been much more aggressive than during your administration. so, if you look across the board a lot of the things that were very contentious and your administration have been maintained, and yet they are not so controversial now. what do you make of that distinction? >> they campaigned against most of the programs, and they are

reluctant but i think they've made the right decision with respect to guantanamo. it's not what they wanted to days after the inauguration. they gave orders to close it. it's not closed. it's still open. the reason why we did what we did and it's valid and i think they've learned over time the benefit of that and i will give them credit as i did for the enhanced drone program and the fact that they have been very successful in taking out additional targets. >> let me ask you about iran. you obviously spent a lot of time on the problem and that nuclear program when you were in office. back in the news again with the recent u.n. report that they are in fact pursuing with a - weapons system. do you have any doubt that the hour intent on getting the bomb? >> i don't.

they are quickly committed. >> how then, remember in 2007 the national intelligence estimate came out with high confidence that they had abandoned their program in 2003. how do we get from 2007 to now 2011 where the u.n. and essentially says yes they have been pursuing it across this whole period? >> i think it was an interesting intelligence problem, and i remember when it came out i was actually confronted by friends of the united states who suggested that we had arranged the intelligence finding in order to alleviate any requirement that we might have felt to do something about the iranian political program and i can assure you that is not the case we were doing and that is in fact what the intelligence

community process produced. it was clearly a fault result and it in part flowed out of the continuing legacy if he will of the national intelligence estimate on iraq wmd that was ultimately challenged and turned out to be wrong as well. as the mix of the swinging of the pendulum within the intelligence community. >> and i think it was -- there was a great reluctance on the part of the policy makers to deny the validity of the report, and so it is a difficult dilemma because when they produce this result there is a process that had been adhered to but it produced a final result without question. >> now we have news reports that israel is thinking about reconsidering once again a

strike on the nuclear facilities you faced a similar situation in your of administration regarding syria from your memoir i knew that the israeli officials came to you and said here is the intelligence we have about syria. why don't you tell the folks here what happened and how it played out inside of the administration. >> what happened this would have been early 2007 was we had acquired information intelligence that said north koreans had assisted the syrians in building a nuclear reactor much like the one that the head pyongyang in north korea that they had used to develop their plutonium within and that such a facility had been built by the north koreans in eastern syria, the place called elkus are to the dhaka -- alkabar.

i had great confidence this was good intelligence. they had a great pictures. [laughter] the north koreans had an individual who was part of their delegation in the six-party talks when we talked about trying to persuade the north koreans to stop the program it was also the main liaison with the syrians in proliferating this technology from north triet to syria. he was doing double duty. the significance of it is designated terrorist sponsoring state acquiring from another designated terrorist sponsoring state, north korea, this devotee capability. and one of the things we were most concerned about and i have spoke about at the time was the possibility of another 9/11 but this time the terrorist would be armed with something far deadlier than box cutters and airline tickets. they would have a nuclear weapon

or a biological agent of some kind, and obviously this was a situation where it is most egregious case of nuclear proliferation i can recall during my time. when the israelis produced the evidence we spend a lot of time on it obviously. i advocated a course that involved the military strike to take out. >> by the united states. >> that was a target out there all by yourself in the desert. there wasn't likely to be collateral damage. the reactor had not been fuelled so it wasn't likely there would be radioactive fallout. it was a very doable proposition. the decision was made not to do that. the president was reluctant. partly there were doubts about how good the intelligence, again, part of the legacy of the earlier failure on the iraq wmd. what ultimately happened of course was the israelis decided

they would take it out and they did and executed a beautiful attack. it worked perfectly and the syrians were sufficiently embarrassed that they hurried up, covered it over. >> did they pave it over i think? >> the build a structure on top of it, but there was never any word at that time. we leader, about a year later we briefed on it and provided a lot of information publicly about the event itself. so the big concern that i had in part was there was a great opportunity for us to demonstrate to the iranians the we were deadly serious about stopping the proliferation and prepared to use military force if necessary to block the proliferation and the acquisition and the nuclear capability in the course that would've been a great message to

send to the iranians. unfortunately i lost the argument. >> in history obviously the iranians are aware of do you have any doubt if they conclude the united states will not act militarily against iran but they will in fact strike on their own? >> we have seen them act against the reactor in iraq in '81 and against the syrian reactor in 07 and i think -- i don't have any inside knowledge or been involved in the loop in terms of the classified information or anything like that since i left office nearly three years ago now so it's what i read in the newspapers and having worked with the various players involved over the years is a very good possibility that the israelis view this as a fundamental threat to their existence and they will act. >> if you were the president,

what would you do to detour them to persuade them? >> i'm not sure why would. [laughter] welcome on and not the president, that's why. [laughter] but i think that if they decide they need to do that i would like to think that the united states would be supported. >> i recently interviewed former secretary of state james baker, and we talked a little bit about iran and he said he's convinced iran will get a nuclear weapon because he doesn't think the u.s. will act, and he argues he thinks it is a containable problem and in a sense is to get a nuclear weapon could put together an alliance of states and you could put together a containment strategy not unlike the one we pursued for 40 years during the cold war. do you agree that iran with nuclear weapon would be containable?

>> i don't. i have major concerns. i think it is a mistake to assume that iran will operate in the same way the soviets did when confronted by the united states. we followed the policy of the mutually assured destruction that led to the determines effectively, and both of us were reasonable, responsible if you will international actors, and it still was a time of considerable attention obviously and fortunately we got through without there being a bigger confrontation although there were a couple of tense moments. it's not an all clear to me that you can be confident the mutually assured destruction would have the same deterrent value. i also think it's important to remember again there are probably the leading sponsor states of terror in the world today. they are the prime sponsors of hezbollah and hamas that the

capabilities that they would acquire were they to develop a nuclear inventory or an inventory of nuclear weapons frankly is a frightening prospect when you think about it within the prospect of what the iranians have done. i really believe the experience of going to riyadh for example to visit with the saudis and to leave and if you close your eyes and listen to the arguments you couldn't tell what city you were in. they both were extraordinarily concerned about iran and the possible development of the nuclear capability in iran. both use the same and algae and say you have to cut off the head of a snake. so they are -- >> one says it publicly and one says that privately. >> but they both say it.

all i worry about it in part because i think it's one more very strong indication that there's a fundamental shift under way in that part of the world in terms of the decline in the u.s. power and influence and it comes in the form of the exit's in iraq and afghanistan that the way the administration is going to fail to follow through on the new status of forces agreement with the iraqi is so we could have a stay behind force that would help them with their security requirements it looks to me like we are headed for the exit in afghanistan as well as quickly as possible and at the same time we've got iran building of the inventory what's likely to become an inventory of the nuclear-weapons, and our friends in that part of the world aren't going to have any choice. they will have a couple of options. one will be the possibility that some of them may decide they want to acquire their own

nuclear capability and there's been reports recently in the press that the pakistanis sold in richmond, uranium enrichment technology to the north koreans and that's how they got into the enrichment business and i think we would see the other option, the other possibility as they clearly have to begin to pay homage to the mullah because will be the dominant power in that part of the world, the persian gulf, and people that have traditionally and historically been good friends and supporters of the united states are going to have serious questions about whether or not they can count on us going forward. some of the president ordered a military strike against the facilities, your reaction would be? stand i would be inclined to support it. >> interesting. let me just shift to the economy

for imminent. you were famously quoted in the early part of the bush and administration saying that deficits don't matter. that's when debt is a share of gdp was about 40% or so and deficits were about 4% of gdp. now it's 9% of gdp as the deficit and closer to 70% of debt as a share of gdp. deutsch deficits matter more now? >> deficits matter more now. [laughter] welcome i think it's important to put that comment in context. i had during my tenure in the house one of the most conservative voting records and i think my conservative credentials are well-established for the policy that we were at the time this was in the early days of the administration talking about and i was referring back to the reagan

years of the beginning of the reagan administration when they simultaneously kept taxes, reduced revenue and income to the increased spending and the point was he didn't pay a political price for the deficit that resulted in net. it was it turned out to be sound policy both in terms of the military buildup as well as the change in the policy and reduction of rates and so forth. and that there are some circumstances in which the deficit per say doesn't have the kind of political consequence that we are faced with now. >> to which they do. >> let's open it up. >> we have one question from matt murray. >> thanks for being here very much. my question to go back we started talking about the bin laden raid and the issue of surprise. what should u.s. policy generally be to pakistan right now? as you know, of the robust the date among the republican

candidates including on the foreign aid front it is a subject of debate here in washington. the trust them, do we not trust them, should we be involved or not? what are your thoughts? >> i think pakistan is extremely important for us, and we need to maintain that relationship. i think we paid a heavy price for the press of the amendment was adopted some years ago that in effect shut off any contact between the u.s. military and the pakistani military. this was after and i think in connection with the first test of a nuclear weapon. you've got 170, 180 million population in pakistan. they do have an inventory of a nuclear weapon. there have been these press stories on the basis of the comments i made earlier. a.q. khan who was the father of the pakistan nuclear program and who then went into business for himself selling to the libyans and the a other north koreans

where they said it the north koreans bribed senior pakistani officials for the enrichment technology that the north koreans are now using to enrich uranium to build a nuclear inventory. and we know they have enrichment capacity now. there's been a delegation that included some americans that sold the facility within the last year or two that's got some 2000 operating centrifuges, obviously acquired from pakistan, that most korea is operating to develop the basis for a uranium bomb is opposed to the plutonium bomb which they already had. we can't afford to grow pakistan over the site. we've got a lot of friends in pakistan. there are also obviously elements that are not from the united states. i fink we have a pretty good relationship going with musharraf but of course he's no

longer there. he's threatened if it returns he is not likely to return, and i think that their government is weakened. i think their intelligence service is of a mixed opinion in terms of their approach even as painful and as difficult as it is i think it would be irresponsible for us at this stage to pull the plug on that relationship for to satisfy some political yearning to the lack a long slide ahead because that is likely to be again a major source of proliferation to north korea with respect to the nuclear capabilities. >> i'm going to give the final word to the editor in chief robert thompson. >> vice president, thank you very much if you could hold your formation. i would also like to death again the sponsors and the group,

intel, lenovo has a device you can take with you. i have to explain again the privilege as a software glitch journalists are writing stories better than software codes. you've now discovered that. as well as nas-daq and waterhouse. you have 24 hours to get your priorities in order. so i would always make that a pretty. next year we will be here at the same place within a couple of days so it will be an absolutely fascinating time to come here from wherever you are in the world to get a full and proper briefing from the incoming administration. this special report about the council meeting will be in "the wall street journal" on monday and finally we have the conference equivalents in the

adjoining room so please enjoy yourself. thank you very much for coming. [applause] we are live now back at the brookings institution in washington. they've been hosting a discussion today looking at iran's nuclear program and international sanctions. the group is keen to hear from white house security adviser tom donilon next who will be the keynote speaker introduced by the head of brookings strobe talbott. that is set to get under way in ten minutes from now what 1:00 eastern. we will have it live once it does start. until then more about the international economy and back to the discussion at "the wall street journal" ceo council with world bank president robert zoellick. we will show you as much of that until the tom donilon these and starts here around 1:00. [applause]

thank you for being with us and all for staying at the end of a long day. i guess we should start from the news. awhile back you said the war is in a danger zone and that made me think two things. one is it is a direct quote from a tv series on as i'm sure you know that and also it is true and i guess today we meet on a day when it is worse than perhaps the consultation beyond. how do you feel which is at the moment in terms of the work? tenet we are still in the dangers and i agree a little bit more in your question. i think there's three issues that europe is trying to struggle with. one is the one that tim mentioned about competitiveness and the other is the banking system and the third is the sovereign debt and they are obviously interrelated but as

they try to deal with one problem, so for example debt reduction for greece it creates the risk of uncertainty for sovereign debt. the device they've put together so as to try to give a firewall for italy and spain was clearly the weak link so what you see going on right now is the fact that lack of certainty about the devotee to rollover the debt with this reflects is something quite interesting which is that starting in august you are starting to see markets look not only at a calculation of the economics and finance but making judgments about the government's so in this case if you look at the statistics for example of the u.k. for the dead and the deficit as a percentage of the gdp they could cause a pause as well but because the government set the path there is a clear direction.

now, three implications of this that are worth paying attention to. one dimension to the emerging markets. keep in mind developing markets have been about two-thirds of global growth for the past five years but starting in august what we saw was the ramifications of this on equity markets, bond yields, some of the currency's, trade, and the thing to watch which we started to see anxiety the past couple of months on the emerging markets is whether this will start to affect the consumer business confidence in those markets in which case since emerging markets have been key to the global growth you are in a very different situation. the second aspect is that what the europeans are still doing is providing liquidity to buy time. i'm not against bosnian time but it depends on how you use it and underneath it has to be a growth strategy and this will be true for the united states some issues and an innovation, that

is an issue that still the europeans have not begun to address. but the third one and i will share this because i was at the meeting as well is that there is bigger power shift going on here so the vice president is here when you think about the economic and the security implications, and i couldn't help but to be struck while i was in that meeting seemed emerging markets around the room watching the europeans basically unable to get their act together and thinking these are the countries that lecture us and told us what to do and frankly we would be willing to try to help but they have to figure out how they are going to help themselves first this will have huge implications and i tell you if there is one dealing i held with most to never see the united states in the position it was in that meeting in france and they choose someone else which i mean she this particular

we are waiting for them to do so is there any other solution in the bank preserve the lead to becoming the lender of last resort? >> i think what this focuses on, one of the questions must session focused on germany. germany is going to be the key to this. germany will not be able to do it by itself is going to require careful diplomacy with france, european commission and other places and the problem one has is germany has a series of positions that individually seem reasonable, don't let them in bailout countries that don't make reforms, not poor money on a whole, even the christian about should you try to put some more into it? the problem is with the german position comes down to is others in europe need to be more and the would be good as an economic matter it does raise the question of whether it is going to happen and what it means for

the year rose -- eurozone and it comes back to the fundamental grove question. in the short term everybody is going to watch to see whether the italian government should be able to make it. the spanish government should be able to make it but it is a question of whether they have enough confidence some people say there's too much uncertainty i'm getting out and we have certainly seen that already in terms of the banking system you are having a form of liquidity withdraw, slow motion if you want to use those terms and that's going to be harder to manage and at some point this is going to move from a set of a step-by-step process to one that we've seen the confidence breaks and it's hard to put back together. >> do you subscribe to that view which the financial markets think back to the worst and the germans on been this lender of last resort so we have to let the marketplace that magic a little bit longer before we see the intervention.

>> i don't know whether the german view are willing to play a role beyond what they are hinting at which is to try to keep the markets fluid and liquid in the event of a crisis and there's lots of steps that they can do, so i think right now you are seeing the pressure put on a matter of fundamental reforms will be made that this is occurring in an environment where you have the rest of the world economy somewhat on a hinge point depending on what comes out of europe. >> one will be on europe and then we will move to something else. what does the future look like for the year autozone? are we seeing it at the crossroads or to the fiscal union of sorts or the disintegration of the eurozone is there a third way? >> i worked a lot with germany because i was the of negotiator on the unification so i have a good set of relations and a lot

of respect. i've been there twice in the past three weeks and i would just say this, on the one hand there's a feeling among the german public that they don't want to be taken and other people are going to have to strike in the reform process but one should not underestimate the german commitment to europe and the european union that i think with the chancellor is trying to do and frankly i tried to encourage her and the minister to do this is to say that where is this going, what sort of system are you going to try to create? ..

>> for economic diplomacy, including for the united states it has implications. i was on my way to london. this is a big issue for london because if you have a deeper integrated eurozone one of the implications for britain, how doesn't want to play that? >> and house of china fit into this, by which i mean the european situation. there was some hope even the europeans that the chinese might contribute some money to the rescue package. there was attempt made by european leaders to offer that. do you think they will? and if so, why would they? >> i have to say, i still am not understanding. it to me is somewhere between an embarrassment and foolhardy.

because for this reason. number one, the idea that europe where the average per capita income is about $40,000 per year should be going to china where the average is about $4000 a year, with a begging bowl. in the world, i still live in a world where i'm trying to connect the economic power and put the relations. that's not a good thing to do. secondly, it wasn't going to happen. as we have seen with the chinese, they have their own domestic opinion. i will just summarize one chinese official said to me and another, he said at the end of this he said if germany isn't so concerned about this, why should i be so worried about it? that's the message you're going to get coming out of east asia. having said that, if europe comes together and then i do think that other countries would be willing to operate, but this is the irony of ironies, going back to the period of the late '90s. they will operate to the imf so the imf which was the sort of

much decried sort of tutor of economic reforms in the late 90s is what the emerging markets say that message has to come back to europe and that's how it will work any multilateral system. >> i'm talking about china for a second, there will be investments. if people privatize come if there's opportunities, that will come. what i'm talking that big bailouts. >> our concern about the chinese economy per se with both present inflation and slow down on the rise of? >> i think inflation has been a risk. if you look at the history of the chinese economy, as we are looking about here in 2012, that's the point of great sensitivity to the chinese but i think they by and large habit under control. i don't think it is totally addressed yet. i believe you will see some slow down in the chinese economy. i don't subscribe to these collapse feces. the best thing for china to do for the united states and europe is to keep growing.

but i will say there's something bigger going on. we have a product with china that's quite interesting. the chinese are recognizing that they can't depend on export and investment led growth in the future as they have for the past 30 years. just to give you an reference point, if china continues to grow approximate the same rate that it has, by 2030 it would be like adding 15 south korea's to the international system. it's not going to work. the good news is the chinese recognize this. it wasn't clear to me when i worked on these issues with japan 20 years ago, and so one of the projects actually that we have been working with the chinese over the past year leading into the next generation of leaders is how to take the next five your plan with its particular goals of what to do, and how do you do in particular. so this goes to some fundamental issues about the financial sector, pricing, you know, how you try to improve returns to

labor and consumption as opposed to investments i. and i'll just say that the details will be in the invitation as they always are. i am impressed that a country that is growing at 10% a year for 30 years as the presents a single, we are going after we change the structure. because maybe some people in the united states and your body think about changing the structure of their economy spent what's the concerted effort, even with a commitment, to change the focus of the economies such as that one? >> i think they want to begin now. i think it was in the last five your plan but it got thrown off because there stimulus plan relied on the traditional tools. it's quite interesting to see, they relied on traditional tools and investment. the united states relied on our traditional tool of trying to expand consumption. but having said that, it's hard to predict because you now have more forces that are entrenched with the old system.

but i will just say, the chinese are aware, for example, that within five years you're going to for people leaving the labor force been coming. so there in the process of trying to deal value-added production. now, it gives he did for the rest of the world to try to do that in the form of innovation and try to capture some of the benefits of an effective integrated international system. but i honestly think they'll be some opportunities. so for example, if you deregulate some of the service sector you will create more jobs, increase productivity which also creates opportunities for western firms. similar in terms of if you start to change some of the pricing of some of the natural resources. basically had a rather capital-intensive develop a strategy. it worked for a certain export led growth for that period. so like a lot of things in life there's no preordained. i think however for the interests of the united states and others to work with china in these structural reforms would be a mutual interest. >> where do you stand on that situation?

>> it should appreciate, but i'm a practical person who tries to do the world as it is. if you bash them head on i don't think you'll necessary get progress. where the chinese have a different view of this than the u.s., is that we're at least many in the united states would see currencies as a price signal that would change structural behavior, in times of you as welcome if we have price signals change and the structure hasn't changed, we could have a lot of unemployed people and social unrest. so that's were i think trying to work on the structural side while working on the price side is the most effective means. >> also going to be said that u.s. and congress will do a lot of bashing. there's been a lot of bashing, which hasn't helped at all. is there any other way of doing it? a diplomatic way of working on this? >> as i mentioned, in diplomacy in general if you can find

points of mutual interest, you're likely to get further than if you just try to overwhelm somebody, and i'm not sure in this case we will overwhelm them. so the points of mutual interests are the types of things that we will be unveiled with the chinese early next year that focuses on some of the sectors that need to be change, opportunities for service sector development, opportunities for value-added production development. and look, there'll be other opportunities. so for example, return to work with the chinese now on the possibility of some of the low value added manufacturing, moving to third countries including if we can create the opportunities in sub-saharan africa. so i think, i honestly think that is probably going to be more fruitful, even though sometimes it may not be as satisfying for somebody as clubbing people. but look, i want to start back on this, and it's an important point. in my experience over some 30 years, people here have more experience can if i look over

economic histories says by true love is history, do you want to know the real thing the country has to do? quit blaming others. clean up your own act. that united states needs to pick some things at home. >> do you think that is understood now in this town, for example? >> i wasn't here all day. >> i want to ask you something, at times in the past in history we have had, we have slid back into protectionism and things of that kind, and yet are you concerned this might happen today? and in the next two months? >> if you take the eurozone events we talked about, there's a whole set of potential implications. one we are seeing with the work of the world bank, is the european banks try to increase the capital. they can either increase their capital or the content assets. and so we are already starting to see trade finance starting to run off because it's a good thing to run off.

the european banks selling assets. so in the balkans and central eastern europe, these are some dangerous situations. that affect them at a slower growth on north africa is at a time when you need a benefit but it really can run across different regions of that sort of one effect. another effect depends on how these competent issues are dealt with. so, what's the risk to counterparties? which the risk of confidence starting to not only slow down the tray but start to affect financial markets more generally? that goes to point about protectionism. there's always the risk that when country start to feel the nationalist pressure, have high employment, that they will try to treat behind protectionist borders. its my view that in trade the best defense is an offense. to try to say oh, well, don't do that, in my experience is less effective than having and offerings agenda. and, frankly, the united states hasn't had an authentic trade agenda. it finally passed three trading

candidates, two of which i negotiate and i left the job in january 2005. >> on that note let's open up to the audience for any questions or comments. >> questions, comments? >> jump in here, please. any quick questions? >> i have plenty more, if not. >> the issue of trade, defense being a good offense, do you foresee any ability to the secretary geithner and leader canter talked about maybe there are some areas of opportunities, you see any of those on the horizon where we deposit in the area of trade? >> i see a large number. i think people have to start take a little fresh, for example, there may be some possibilities. i would look at some things with europe on services. frankly, is trans-pacific partnership is an appealing concept i would like to do more

about the details. we already have free trade agreements with most of those countries so as i would like to know what was being exacted -- what was being added. i think that offers a news with big opportunity. so i think whether you look at it sectorial he or the agenda going for various countries, it's worth looking for this opportunity with brazil. right now brazil has been more reluctant on some of the terrorists in deputy of because it's afraid about chinese competition -- >> every monday you can see all of this with a world bank president online with our video library at c-span.org. we will break here and take you live to the brookings institution. tom donilon is the president's national security advisor. he will be speaking shortly here at the brookings institution. they had been holding and all the discussion about iran's nuclear program and proposed sanctions, and mr. donilon's comments and speech should get underway shortly, introduced by strobe talbott.

spent the afternoon everybody. welcome to all of you. i'm strobe talbott. it's a great pleasure on have all my colleagues at the brookings institution, not just welcome you but to welcome tom donilon. as you know, times responsibilities our global. to wit, he has just come back and no doubt is fighting the jet lag still. from a nine day, three trip, three country trip to asia, during which he conducted, along with the president of course, numerous bilateral conversations i think touching on the relations between the united states and 23 other countries. his title features the words national security. and that means that there is particular focus coming from him and his office on the issue of how to prevent a proliferation of dangerous nuclear technology in general, and have to deal

with the iranian threat in particular. now, this is a set of issues that has received a great deal of attention, public official and international just in the last couple of weeks. the international atomic energy agency put out an important and in many ways disturbing report a couple weeks ago. the iaea board passed an important resolution just late last week. and, of course, the new measures were announced by the united states, the united kingdom, and canada just yesterday. now, a number of you here in the realm participated in a discussion with two excellent panels during the course of the morning. and we are very grateful to tom for finding time in his very busy schedule to come and give us an authoritative update on

the view from the white house. he has very little time to be with us. he needs to get back to a series of pressing, indeed urgent, meetings immediately after he finishes his talk. so without further ado, i'm going to turn the lectern over to him, and thank you again for being with us this afternoon. [applause] >> it's terrific to see so many friends here. i don't get a lot, i don't get out a lot these days. [laughter] so for all of you whom i haven't called or seen in a while, i apologize. i hope to see on the way out of here today to say hello. as stroke mentioned i am just back from the president's trip to asia where it really was a landmark trip where we were engaged in, not the topic but

i'm going to take opportunity anyway, we are engaged in a fundamental strategic reorientation of rebalancing of our global policy. and we were able to really execute on each and every element of it, on the diplomatic, on the economic and on the security side. i would love to talk to, talk about that at some point as well going forward. it really was a terrific trip. thank you, strobe, for your introduction and your friendship and your leadership. angel years of distinguished public service as well. and to steve, thanks for inviting me to your event today. before i get into my speech i want to reflect just for a minute or so on the role of places like brookings. from the perspective now of a policymaker. fairly deep inside an administration, and the sentiment i want to express is one of personal appreciation. it is absolutely critical, it's

an essential relationship i think between policymakers and those who provide fresh pragmatic effective intellectual capital. really couldn't be a more important -- it is very easy with the press of business to get on a certain policy path, and not have the kind of fresh thinking that's necessary. and the work that you do, and i see really many people around the room on whose work i have relied, who have really had an impact on the thinking in the administration, and has an impact on policy. one of the core policies that president obama has pursued, and i see joe and others here, has been in the proliferation area, and nuclear area. the top i'm going to dress today is pretty core to that which is really fundamental affirmative-action to of the obama administration. to reduce reliance on nuclear weapons and reduce the danger of nuclear weapons, in the world

today. today iran is our topic and it really couldn't be more timely. as strobe said, in recent weeks there have been no shortage of reminders of the seriousness of the threat posed by the iranian nuclear program, and most notably as strobe mentioned, the recent iaea report, and have the choice was made by the army regime as -- that is the topic i want to address today. i know he'd been through a number of technical topics during the course of the discussion. i'd like to pull back and i'm going to say something to be i know that folks here don't entirely agree with analytically but i want to lay out really what i think the overall impact has been of the result of u.s. polls along with international partners with respect to iran over the last three years. i'd like to put these developments in context, and as i said, specifically i want to discuss have a policy to the

united states and international community has succeeded in increasing the pressure on iran for its failure to meet is really core international obligations. and more broadly i want to address how profound the iranian regime has been weakened and isolated at home, in the region and globally. i will get into this in some detail during the course of my talk. to begin with i think it is important to reflect on the reality that we in the obama administration facing genuine 2009. tehran believed, and, frankly, many in the region believed, that iran was offended. entering the iranian regime did not face at the point significant challenge to its legitimacy. that would change during the course of the year 2009, and pretty substantially. regionally iran's reached seem to have expanded like never before with iran's proxy with hezbollah threatening others across the region and, indeed, in a conversation we had when we came into office it was a deep sense, but the other in talking to counterparts around the region and around the world as

we came into office. in contrast the international community was divided how to do with iran's nuclear program. multilateral diplomacy have stalled. i think that is a fair assessment. and american diplomacy with tehran, direct american diplomacy had seemingly been taken off the table. i think that is a fair assessment. you will find me kicking myself on these things because i do want to really go through carefully and test every assertion i make for precision predator because i think it's important to think about this. during that time, iran went from having 100 centrifuges in 2003 to more than 5000 when president obama took office in january 2009. more troubling was the fact that many in the world had even begun to get the benefit of the doubt to the iranians. and instead blamed the united states for tensions over nuclear program. iran's to the program.

and thereby allowing iran to escape the candidate. this was a dynamic we face when it came into office. this is a dangerous dynamic that we were determined to alter when we came into office. president obama and the administration has long been clear about the dangers of iran's nuclear program. i think it's important just sent that out at the outset you pick it is a grave threat to the security of the united states and of the world. a nuclear-armed iran would like to mend -- would likely mean an arms race in the middle east. a very high degree of potential miscalculations. a nuclear-armed iran could further involve iran's support for terrorists and would constitute a threat the country across the region including our closest ally in the middle east, the state of israel. a nuclear-armed iran would pose a significant threat to the vital shipping lanes of the persian gulf and the strategic strait. and iran armed -- and iran armed with nuclear weapons with

long-range missiles to deliver them would also pose a series threat to nations outside the region, including our nato allies in europe. and a nuclear-armed iran would pose an unprecedented challenge to the nuclear nonproliferation treaty. the cornerstone of the global nonproliferation regime, and this would raise fundamental questions about the ability of the international community to stop the spread of the world's most deadly weapon and likely lead to a spiral of additional proliferation. for all these recent president obama has been unequivocal with respect to our policy towards the iranian nuclear program. and i quote the president, there should be no doubt the united states and the international community are determined to prevent iran from acquiring nuclear weapons come and go. those are the president's words. that's the policy of the united states. shortly after taking office we present iran with an unprecedented and genuine opportunity for dialogue, and this is very important. the united states directly in

our p5+1 partners presented tehran with a clear choice, fulfill your international obligations which will allow you to deepen your economic and political integration with the world, achieve greater security and prosperity for iran and its people, and allow iran to return to its rightful place in the committee of nations and pursue a further up -- our tehran can continue down the path of flouting its response but to faced even greater pressure and isolation. the purpose of the offer had two dimensions to it. first it wasn't a sincere offer of dialogue. dialogue. is a bona fide offer directly to the leadership to engage in a diplomatic approach and potential solution to this problem. it had tangible benefits for iran obviously. it would attempt to seal the deal with the situation and a diplomatic fashion. and this is inaccurate describe our a lot of writers. there is a good piece in the washington quarterly describing. second, we knew if our offer was

rejected iran's very to meet its international obligations would be exposed to the entire world. the burden which it. the committee would see that it was iran, not the united states and the rest of the international community, that was responsible for the impasse. that in turn would increase the ability of the united states and the international committee to mobilize for holding tehran accountable for its behavior. and that over the past three years, that's exactly what has happened. we have gained tremendous and more leverage in terms of our ability to hold i've and accountable as result of its refusal to engage with a bona fide sincere offer of diplomatic dialogue to address the issue. as we all know the iran government repeatedly rejected the opportunity for credible dialogue. it also rejected substantial economic, political and scientific incentives. we can go into detail at some point during the talk. it has forged ahead with his new the program, ignored his

commitment and will defy quite tricky the united states security council resolution. moreover, iran has continued a record of deceit and deception. it as spam 30 years pick most recent with a secret enrichment facility which the united states, united kingdom and france expose in 2009. i think is a critical thing, step for us to take and. you recall in september 2009 what the nazis, france and britain basically blew the whistle on a covert facility, which did not allow iran to have that as an option, frankly, for proceeding to break out. indeed and this is really quite critical, iran is the only member of the npt that has not been able to convince the u.n. security council and the international community generally that its nuclear program is for peace purposes. i think that's an important point to underscore. they are the only nation that has completely utterly unable to

convince the international committee of the peaceful purpose of its program despite its protestations about it being peaceful. and its deceit has just continued to raise questions and doubts about this. this has culminate in the iea report we talked a early. the united states hasn't exactly what was ever going to do. with a broad support of international community, we estimate increase the pressure on the iranian regime and raise the cost of its -- our approach has been multidimensional and i want to describe these here, have included five distinct yet mutually reinforcing lines of action. one, we have led the way of organizing an unprecedented array of sanctions that impose consecutive that price iran's behavior. number two, we have led a concerted effort to isolate iran diplomatically as never before, regionally and globally. third, we have worked with

partners to counter iran's deference to destabilize the region, especially during the arab spring. fourth, we have steadily and substantially invested in an deepen our defense partnerships in the region. building a robust regional security architecture that wants iran's -- especially gulf cooperation partners, we have enhanced our significant and enduring u.s. force presence in the region. in addition we have worked to develop a network of air and missile defenses, shared early warning, improved maritime security, counterterrorism cooperation, expanded programs to build partner capacity and increase efforts to harden and protect our partners critical infrastructure. these efforts, and as i do, have reassured our partners in the region. i have been deeply involved in this and it's been critically important i think in terms of reassurance.

the steps industry unmistakably to tehran that any attempt to dominate the region will be to do. they showed the united states is prepared for any intentions. i would add that our new missile defense program with our european allies, so-called phased-adaptive approach, is more effectively geared to protecting our nato allies from the growing iranian missile threat that we face over the next decade. it has a lot of advantages. that's a topic of another seminar or session here, but it is precisely geared to the threat. we are successfully implementing it in europe. the lisbon nato summit, although european countries signed on. turkey most recently agreed to host a forward radar. and it can be done in a timely way. and then, final element of the approach i wanted to describe today, is that even as we keep the door open for diplomacy, president obama has said as recently as last week we are not

taking any options off the table in pursuit of her basic objective. taken together, his multidimensional approach, multidimensional, simultaneous and read enforcing approach is present position we can input any option with a full range of options. as we continue to ratchet up pressure on the iranian regime for the continued choice to continue to flout its obligations. >> with respect to the first element increasing pressure to sanctions, we have succeeded in imposing the stronger sanctions on the iranian regime to date. here in the united states we worked with congress to write and the president signed the sanctions accountability and divestment act. combined with task measures we now subjected iran to the toughest u.s. sanctions ever. we have since used various authority provided in this act to get international firms out of iran's oilfields and banks out of financial sector. internationally we have defeated and build a broad and deep international coalition uphold iran a candle to present a bomb

person everybody has engaged is foreign counterpart including the leaders of russia and china, and just as late we got a 70, honolulu, lengthy bilateral meetings both with president hu jintao and others. this paved the way, these efforts paved way for passage of u.n. security council resolution 1929 which helped create the most comprehensive international sanctions on iran to date. we have worked with allies and partners to build on the u.n. sanctions and those in the room, multilayered effort that we put in place what the u.n. security council as a base. the european union has imposed strong measures against iran's sectors as was iranian revolutionary guard. south korea and japan, to of iran's major trading partners have taken action to limit commercial activity and financial links with iran. ..

installed within four years and the design for that scale. we are now nearing the end of 2011 and the iaea reports that iran install the 10,000 centrifuges are around 6,000 operating right now. importantly, not only is it hard for iran, it is more expensive.

as many studies demonstrated would be far more economical and efficient for iran to purchase nuclear fuel on the international market than to develop an indigenous and richmond fuel production capability. remarkably though iran continues to make huge investments in the program most of them unpublished even as it cuts back on support and investment in this economy and its people. this is the larger context of the iaea report and i want to be clear about this. we were not surprised by the report because it confirmed everything we've known since the first day the president took office. this report is entirely consistent frankly with the fact analysis sheet our approach since january of 2009. for example we knew that iran had an active and structured effort to develop the weapons technologies and until 2003 and in the words of the iaea report, quote, activities relevant to the development of a nuclear explosive device may still be on going. the facts are undeniable. despite decades of denial and

deceit and notwithstanding the setbacks i described, it should be clear for all the will to see that in the nuclear -- civil nuclear program, the government of iran seeks to developing nuclear weapons to battle the. put simply, the iranian regime has not offered is altered behavior but we have succeeded in the program and the international community has halftime speech and means to affect the calculus of iran's leaders who must know they cannot evade or avoid the choice we flee before them. going before we will therefore use every tool let our disposal as i described earlier to continue the pressure on the regime and sharpen the choice they must make. we need to be vigilant, and we will be. we will work aggressively to detect any nuclear effort by iran, expose them and force them to international inspection just as i discussed earlier when we disclosed the facility. thus denying the option of using the facility to secretly produced enriched uranium.

with the iaea inspectors still on the ground, any iranian effort to divert safeguarded material would likely be detected quickly before iran could use the material to produce a significant quantity of highly enriched uranium. been while we continue to increase the pressure an assault is just yesterday the secretary of the clinton and geithner announced additional steps we've taken. for the first time your targeting the petrochemical sector providing the goods, services and technologies to defect and of a vice penalties against any entity that engages in such activities. we are expending energy sanctions to make it more difficult for iran to operate and maintain and modernize its will and gas and for the first time we've designated the entire banking sector as a jurisdiction of primary money laundering concern the telling extensive deceptive and illicit financial practices across the financial sector including by the central

bank of iran. making it clear of the risks faced by the government or other financial institutions that continue to do business with the bank and we are certainly not ruling out additional steps against iran's section including against the central bank of iran. again as we do all this we are not taking options of the table and no one should doubt that. this leads me to the larger point that i want to make today and that's something i want to discuss publicly for some time and that is the extraordinary isolation that iran finds itself in today. even if tehran refuses to engage in the danger is destabilizing behavior, iran is fundamentally weakened, more isolated, more vulnerable and badly discredited than ever. compared to when president obama took office iran is greatly diminished at home in the region and around the world as a result of the choices made by its leadership.

on the first situation domestically in the iran at home iran is feeling tremendous pressure it's harder for the banks to support the nuclear program and terrorism to engage in the international finance. just recently president ahmadinejad called sanctions, quote, the heaviest economic assault in the country's history continuing every day our banking and credit to these agreements are being monitored and locked and banks cannot make investments anymore it really is becoming exceedingly difficult for iran to deal with in the world it's becoming increasingly difficult with the legitimate banking system in the world. we've also made it harder for a year on her for the government to purchase the refined petroleum and goods, services and materials to further develop iran's oil and gas sector. according to the minister the country is facing a shortage of $100 billion of investment deals with the oil and gas sector that will increasingly affect future revenues. other sectors are being affected

as well. the international business community shunning iran and major companies, shell, to leota, ubs, the credit suisse in the long list have ended the or drastically reduced business with iran. again as a result of the decisions made by the leadership. the impact of the sanctions is compounded by the rampant corruption of the patronage of iran. the islamic revolutionary guard corps continues to expand its involvement in legitimate iranian economy at a time when the people are being squeezed by the shrinking economy, the i rtc is being filled and these funds are passed to syria, lebanon and yemen. it is only ads to iran's economic woes and with the frustration of the people as a result year on's economy is increasingly vulnerable. inflation we estimate is around 20%, unemployment is persistently high and contrary to what has been written on this, despite the oil prices iran will of negligible economic

growth this year these are the heavy costs the regime has chosen to impose on its international obligations. these economic difficulties are one more challenge to the regime that's already seeing its legitimacy suffer and this is a critical point is really halfs come into focus since the election of 2009. the response to the green movement to years ago revealed the hollowness of the government and claimed to draw on its legitimacy from its populace and islamic principle. this is a regime that doesn't offer anything to its young population which employees and intimidation and violence to remain in power the same recipe for the arabs bring. it of its isolation from the people the regime is increasingly divided and under great stress extraordinary stress and obviously increasingly and dramatically visible to the outside iran. as the leader and president of initial became increasingly headed towards a confrontation over the direction of the country and supreme leaders

talked about consolidating his power further by abolishing the presidency and we see the developing among the class in the regime is really focused pretty intensely and exclusively on preserving its cost. just as the regime is increasing moving legitimacy at home, iran is increasing isolated in the region. the regional balance of power is to dig against iran and i know there are those in this room who disagree with that assessment and let me go on tolino to shake iraq the iraqi is moving in the opposite direction and i saw your testimony last week in the house on this and went through it carefully and i have some responses to it. [laughter] >> just to give you a heads up on that. but i am reading your testimony.

[laughter] in iran and iraq have different visions of their future, and the iraqis are moving in the opposite direction of a client state that iran may be trying to establish their. they're building a sovereign space state the former vision to elicit outside interference, and one recent poll found that just 14% of the iraqis have a favorable opinion of iran. there is really a nationalist dynamic i think that court here. even the supporters of all solder who has been supported by tehran have unfavorable opinions of iran by the margin 3-1 according to this poll. now, even as we finish removing our forces from iran, and we will do so by the end of december, 2011, we remain steadfastly committed to long-term strategic partnership with iran including robust security corporations which will help ensure that iran remains a strong and independent player in

the world and on december 12th prime minister now the key is coming to the united states coming and we will underscore the ret and the death of the relationship going forward with the united states building out with iraq. as a close partner in the region and multiple dimensions from the diplomatic to the education to the development of oil sector would really critically also robust security cooperation. elon field its efforts to intimidate the gulf states and to the dominant indeed i think that the iranian conduct and i've spent a lot of time working on this has actually caused the dcc countries to unify as never before. and they are resisting iran. the reassurance by the sense of security that i described earlier in the council states nelson said more united than ever and willing to challenge to

iran and we have seen that. next iran failed in its effort to dig it vantage of the air and spring and to put it mildly, the era of spring has been unkind to iran. you can't imagine the narrative to contrast more. the season of change clearly as our system called the leaders flat footed and unprepared. the event from tunis to damascus made a life port huron's claim change cannot become through the violent change and the regime's hawker's has been exposed as they purport to celebrity uprisings abroad while continuing to crush the dissent at home. just like al qaeda, and again this has presented a fundamental narrative of the arab spring, has presented a fundamental meredith challenge two al qaeda. kuran's models extremism violence and a denial of human rights is been repudiated by a generation that is demanding the universal rights by taking to the streets across the middle east north africa. indeed, young people into nisha or reach for libya or syria are now protesting to be more like

iran. not surprisingly, the data polling of the opinion consistently shows that iran's plummeted. while in 2006, the favorability, iran favorability in the arab nation was about 80% generally. it's now down to an average below 30%. the most common reasons for this given or iran's dissent at home, underscored by the reaction in the 2009 election meddling in the region and the sectarian conflict and the pursuit of its nuclear program. rather than looking to iran and the people are looking in the opposite direction toward the universal rights, towards democracy. and as they do, president obama has placed the united states firmly on the right side of history, making it clear the policies of the united states is to promote reform across the region and to support the transition to democracy. today, in the face of the reason increasing united against tehran, iran is basically down

to just two principal remaining allies, and i want to go through this in some detail. the al asad quick group if you will then hezbollah and like iran, the too are fundamentally at odds with the forces that are now sweeping the region. the al asad regime, the group if you will, to iran's most important ally, is a fairly isolated and increasingly condemned. the arab league appalled by the corporate devotee showed remarkable leadership taking the extraordinary step of suspending seeley's membership and turkey, the prime minister's government, which spent a decade deepening its ties to syria and invested a lot of this says it no longer will be fooled by the promises, and today the prime minister joined the international chorus calling for president and sought to step down. the handwriting is on mobile change is inevitable as president obama said and i quote from his own actions asad is

showing he and his regime will be left in the past and the courageous syrian people who demonstrated in the streets will determine its future. analytical the what does that mean? the end of the asad regime would constitute the greatest set in the region, a strategic blow that would further shift the balance of power in the region against iran. tehran would have lost its closest ally in the region having the actively funded and assisted and a very material ways the regime's brutality and killing of its own people in iran would be discredited in the eyes of the people and any future government. iran's isolation from the world would be in the ability to project violence and its instability through the violence hezbollah will be vastly diminished. that's our analytical judgment. finally, iran is increasingly isolated from the international community. more nations than ever are

imposing and enforcing additional sanctions and measures as iran looks around the world to find fewer business partners. its leaders have taken a great nation and a nation of civilization and turned into a pariah state is unable to integrate or engage in the world. this is a tragedy. three recent events in particular illustrate just how isolated tehran has become. first in the wake of the iaea report which is at the outset, the iaea board of governors overwhelmingly voted to demand iran take steps to address the concerns raised in the report. 32 nations voted to demand that iran fulfill its obligations. only to countryside with iran at the iaea board of government meeting, cuba and ecuador. cuba and ecuador. second, iran has been further isolated by the plot to assassinate the saudi ambassador here in washington. i have to confess i was initially struck by the reaction in some quarters. those who looked at the plot and said is this really how kuran

operates? this doesn't sound like iran. it's not the way they operate. well, those of you in this room know so well, and those of you that followed the history the last 30 years this is exactly how iran is operating. it was nothing new. it is the latest example of the support for terrorism from the bombing in beirut to the attacks against the embassy and the mutual association argentina. and many others that would take a whole nother speech to leave this out, but in this room people don't need that history lesson. nor was this a plot of some low-level figure. our information confirms that the officials overseeing the plot, liaison if you will or offices within the irg si quds force, the arm of iran headed by major general who is funded a terrorist and iraq to strike the iraqi government and american personnel. we are very familiar with this group and deal with it every

day. fees' with these facts the international community is taking action to hold kuran accountable. the treasury board and imposed sanctions in four of the main culprits in the facility archimedean european allies who joined, the arab league and the cooperation conflict condemned the plot. last week the u.n. general the assembly vote on friday overwhelmingly to deplore year on's behavior in the plot against the saudi ambassador in washington d.c.. 106 nations voting against iraq, just eight countries voting against iran, just eight countries voting with iran, most significantly not a single muslim order the nation voted with iran. not one. for an islamic republic that once imagined itself as a leader of muslim majority nations, this repudiation isolation could not be more complete. sir, united nations just yesterday at the united nations just yesterday member states voted overwhelmingly to conduct the human rights record.

indeed, iran's human rights now are subject to u.n. monitoring shuttling the claims of the west and a few dissidents are unfairly singling them out. weekend at home, diminished in the region and isolated in the world, this is a dramatic shift in the the kuran fortunes that have occurred the last three years and in this we succeeded in changing of the dynamic that was at work when president obama kimmage office. three weeks ago the leadership was largely united. to date iran has reacted and i don't think that that is an unfair assessment. three years ago the international community was divided on how to proceed, and today we have forged a degree of unity with allies and partners and iran must be held accountable and that is a fair assessment. three years ago it was uncertain whether the additional pressure could be brought to bear on tehran. today the regime is subject to the broad strongest sanctions as ever faced contributing to the fundamental political and economic weakness. i think that's fair as well. kuran's leaders and leaders alone are responsible for the

predicament that tehran find itself in and of the leaders, iran's leaders alone have the power to choose a different course. the onus is on iran. tehran can't choose a different direction. it has to seize a diplomatic opportunity before it and must cooperate fully with the iaea investigators, comply with the resolutions which require elon to suspend all enrichment reprocessing and heavy water related activity. if iran doesn't change its course, the pressure will grow. working with allies and partners we will continue to increase tensions with the gulf cooperation partners continue to build a regional architecture that prevent iran from threatening its neighbors and continue to deepen here on's isolation regionally and globally and even as the door to the diplomacy remains open will take no option off the table for our focus and purpose is clear. pressure is a means, not an end and the policies firm determined to prevent iran from acquiring nuclear weapons and all that flows from that. meanwhile as president obama said we stand with the iranian

people as they seek the universal right, they preserve the government to put their daily emissions ahead of its nuclear ambitions. they deserve a normal relationship with the rest of the world including with the united states. with iranian people can benefit from the trade and ties that come from and to bring the global economy. put simply, the iranian people deserve a future worthy of their past is a great civilization. and that they will come sooner when the regime in tehran abandons its reckless pursuit of a nuclear program that does nothing for its people but endangers the security of the world. thank you for your patience, and i look forward to a couple questions. [applause] >> tom, thank you very much for that. before bringing the session to a close, as you suggest i'm going to put a two-part question to you that i suspect reflects at least some of the thinking and curiosity in the room.

you have made a very powerful statement that the coordinated policies in the united states and the international community have imposed a world of hurt, not to mention the discredit and isolation of iran, but has not yet succeeded in getting iran to use your phrase alter its nuclear behavior. what do you think the chances are of the policy succeeding? and the related point is what is it going to take to get the necessary degree of support from the chinese and the russians, and you've had some exposure to both of those leaderships' recently. >> with respect to the chances for success, given the severity of the challenge and the threat, we in the international community would to ourself to pursue every option, and to pursue as early of the multi dimensional simultaneously mutually reinforcing steps that we are taking. what we require is persistence, and unity, and we have put a very high premium on unity.

and indeed, we believe that is something that the iranian people look out and see and we think it has an effect when the a fairly isolated. as i said, it means to be multi dimensional. and i think that again we can't take any options off the table. over time the goal of course with the to raise the price and force the choice and that is what we are going to do. with respect to the russians and the chinese we have had very good cooperation with the russians and chinese. the support each of the international sanctions at the u.n.. they have been forced those efforts faithfully. they have been very good partners frankly as we have built out a unified effort to force a trace on the iranian regime. >> tom, thank you very much. by the way, we noticed the brookings folks in the room noticed you put out to suggestions on issues which might come back and talk about it at some point.

one is the diplomatic engagement and missile defense will stay in touch. >> could i ask everybody pleas to keep your seat when all i ask, out of the building so he can get back to the white house. thank you, tom. [applause] [inaudible conversations]

[inaudible conversations] there was a flood in fort wayne. people were there on their with sandbags to keep the river so air force one stopped. reagan had a motorcade down to the flooded area, took off his jacket. my memory as he filled three sandbags, said hello and high to everyone, got back in the car and went back on the plane but that might it was still there. it wasn't three sandbags it was reagan filling sandbags with his shirt off.

in the name of the greatest that have ever walked this earth and we for the feet of tyranny and segregation today, tomorrow >> for most of his life, george wallace was an ardent supporter of segregation outspoken against the civil rights movement. the fortran governor lamar man for president four times and lost. one of those efforts cut short by an assassination attempt. this week on the contenders, george wallace from the governor's mansion in montgomery alabama. life friday at 8 p.m. eastern on c-span. former white house national economic council director of treasury secretary larry summers was critical of the euro debt

crisis. he says the european central bank buying the debt is the mosr natural way out at this point. others who weighed in on thethes issue included the imf deputy managing director. they spoke of "the wall streetlf journal" ceo council forum for about 40 minutes.al positio >> to get a quick look at the have the 10-year government bond all at record highs against the german tenure -- 10-year. austria and france, four 0.5%. the first question i have is, what role is the imf's going to play in the european debt situation? is it really too big to fail? -- italy too big to fail? >> if you are looking for them

-- i think that brings the picture. net income is moving in the right direction. we are working closely with european members. we are pushing for comprehensive improvements. we are happy politically that the new government in italy and greece, we're looking forward to working with them. italy is in the g-20. we are happy and honored to have them. >> the yield is above 7%. that is or greece and portugal got bailed out. >> that is true.

they're determined to do cuts and reform. that is all the right direction. they have to act now. implementation. >> larry, is there room? >> i am discouraged by what my friend zhu min said. recognition is the beginning of a solution. the october agreement was ludicrous to suggest that to greece was not going to default. it was impossible to suggest that the esfs could be leveraged and the kind of arithmetic in the stress test on the banks, if you believe that i have some stuff i would like to

sell you. it was the beginning of having a solution to this problem. recognizing the things that have been said before have not been right and have been in denial. if the imf continues to stand with the october framework, it is continuing to perpetuate the denial that has brought us to this point. the great concern here is we have seen major changes in government for greece and italy. we have seen as much commitment to fiscal discipline as we are likely to see. it is likely to be erosion. the markets are giving a verdict. the prospect, this is not new. every financial crisis there is

a moment when people stop worrying about the fundamentals and they start worrying about the other guys and when they're going to flee. we crossed to the point about a week ago. the prospects for success depend on discontinuous change with respect to the nature of the support to prevent panic. we have not seen anything like that yet. perhaps we will from the ecb, the imf, or some coalition of countries. this is not about road shows about your measures on the deficit. this is about a panic and whether it will be contained.

>> i am encouraged by my friend, larry. he is right. this is the starting point but it is a good starting point. finally they are at that moment. confidence is key because we observe that consumers start to change the way they behave. a stable confidence with the new government, we work closely with them. obviously we are encouraging governors to move as fast as they can. >> i am very worried that the situation learned very few

lessons from the u.s. one discussion is what do we do to wall off the prospect of financial crisis? that is about to the esfs and ecb. there is another conversation about initiating plants that provide growth as well as austerity in peripheral europe. both of those conversations need to happen. half measures do not get you halfway there, they make it worse. we learned that in the u.s. >> buying european debt is the only way out, true or false? >> is the most natural way out. there may be other ways. they have to be mobilized and demonstrated.

i thought anyone in the official sector who invested their credibility in the esfs was putting their credibility at a substantial risk. how could anyone suppose that people would a value insurance from a group of officials who were not recognizing there was a default in greece? it is like buying crash insurance from the pilot. it is not a viable mechanism and i think there has been a consistent failure in europe. it is not like we have never made a mistake like this in the united states but there has been a failure in europe and in the imf to recognize that credibility is something that is

crucial. when you speak anyway that is directed at improving confidence by being optimistic, it may work for a time but there is a cost to your credibility. the nation of the -- nature of the assurances have taken a substantial toll. speech wasgarde's a breath of fresh air in terms of identifying reality in this situation in a stark way. i hope that the imf will return to that kind of pattern rather than into the pattern of expressing confidence with whatever the europeans come up with however flawed the underlying concept is. a sense of they oive

crisis? what is the threat here? >> looks, anyone who knows for sure should not be heard seriously on this subject. i say this to you, there is, reading the wall street journal, there seems to be a substantial doubt about the location of the sum of $600 million that was tied uppe at mf global. it is hard for me to believe that anybody has a a good handle on all of the exposures coming what is happening in

europe. we do not know all of the channels of contagion. it is not seen this is an experiment we should be eager to undertake. if financial history teaches us anything, it was a hedge fund with $4.5 million of capital. it was pronounced in the summer 2007 that subprime was only a couple of hundred billion dollars and the market was measured in the trillions. everyone who was walked into a troubled company knows that the surprises are not neutral. they have a consistent way of being bad. i cannot predict where all of the exposures and links are but it seems to me that the

likelihood is that the ramifications will be unfortunate. to take up one other comment, it is sometimes suggested that exposure is complicated. people have had a long time to get ready. this story has been unfolding for a long time. those who favor passivity had a major consideration that people had learned from the experience. therefore it would be ok. they did learn a great deal. the lessons had to do with accelerating their exits in the face of trouble. i would hesitate to buy into the syllogism that exposures have

been run down, therefore it will all be ok. it might be. >> i am always on larry's side. he has a good point. if you're looking for -- there was more on this market to the other side. it is really almost 100 percent pro rated. the european banking system has lost 800% of their gdp. the risk to the banking system would be a global issue. the leveraging -- deleveraging

has some costs already. it is a pretty serious issue. the whole world should work together to help europe and to push them as will to solve the issues. >> i want to give glenn a chance. you are an adviser to mitt romney. most people were watching a rerun of ncis. the number of times europe was mentioned was once, maybe twice. we're talking about parallels to 2008. should mitt romney be more focused on this issue? >> on the european situation, we have some strong suspicions, european banks getting in trouble, money market fund

issues, a repeat of 2018 with a nasty downside which is the fiscal ability to offset that is much more attenuated. this is not an experiment we want to find a race to the bottom. i think there is concern among all the major candidates about the global economic situation. governor romney has said this is something we need to have the u.s. engaged in. he has talked about the need for a strong mechanism in europe. >> what is the role here? we have to fill any void? this is not a situation where we can pinpoint this moment. italian debt became a toxic accept -- asset.

>> toxicity changes over time as people's attitudes change. the fed has been the organization most seriously engaged in the european situation. some of that is unfortunate. the fed is walking a line because the treasury has not taken the actions it should have taken. the fed is on the case. >> should the fed to do more? we have the european situation and the question of weak growth in the u.s. as well. there has been some talk if they have been too aggressive or not aggressive enough. >> that has the dual mandate. the real role of the central bank is low and steady inflation and to be a lender of last resort. the fed has performed well in those tasks. it has politicized itself more than i would think wise by

getting involved in regulatory debate. >> larry, do you think it has been too aggressive? >> i'm at a loss. i understand about political pressure. until the last 12 months, it has always been from the populace left. people want easy money. the fed does not give easy money. there is a fight between the political process and to the fed. that is a common theme. we understand it. what we are living through is inexplicable to me. it is a serious attack on the fed for the access -- access provision of liquidity.

if you think it's too easy to get loans, and you think it is doing damage to the economy, that is a natural critique to make with respect to the fed. i see an economy where the growth forecast has been missed every quarter. i see an economy where nobody is clear what the engine of recovery is going to be. it seems if there is a debate about monetary policy, should we be doing more to support growth, not whether doing too little. i am at a loss. you have proposed radical schemes to bring down interest rates on every mortgage.

they may or may not be good ideas but i don't know how you square those with the view that seems to be ubiquitous in your political party that we have a major problem of an active fed providing too much financing to support the economy. >> that is not what i said. i gave the fed high marks. my concern has been -- >> those for whom you advised to not to draw the sharp distinction between regulatory policy and monetary policy. >> let me speak as a glance -- as glenn. we do have an issue a policy can do more. i do not think operation twist is going to be successful. we have to understand that the

consumer is over-leverage. -- over-levered. i think that monetary -- monetary policy can do more. i happen to think it is a good idea but the government is not acting. it has pushed the fed into a territory it should not be in. >> is it your view that the government should be pushing to expand the current activities or that the government should be pushing to contract the role of the public sector with respect to the housing market? how do your views compare with the general run of views that have been expressed in a debate? >> the difference between the serious candidates and the current president is they are

and -- focused on short run decisions. the canada -- candidates have said it will give as room to do the things right thing in the short term. the refinancing of mortgages does not require an expansion. if we rotate guaranteed mortgage credit. not something i would have done but we have done. >> let me ask min about asia, underpinning the caution about the outlook for the u.s. is the slowing in china. how severe is that going to be? >> is nice we are moving away to china. >> an interesting comment.

>> china is moving into a softer landing. inflation is down to 5.6%. it is still way high. export growth is high but dropping. it is roughly 4% of gdp. we have 9.2% gdp growth this year and 9% for next year. compared to the chinese growth is slow but compared to the world, it is very strong growth. obviously china is facing a lot of challenges. the global economic growth is slowing down and china has

implemented -- implemented fiscal policy. whether china keeps hold for a while, i think that is the challenge that we have to be careful about, particularly inflation that is high. we will see of china will remain high around 5% in the next few years. the second concern is too strong. last year china had 47.8% of gdp. that is not sustainable. you have to be careful. if you slow down investment, how you make growth? that will be the second challenge for the chinese government.

>> one last question before we open it up, i'm still struck by the speed at which the european debt crisis continues to worsen. and a lack of real options for anyone to do anything about it aside from the european central bank. is there a sense of urgency about dealing with this crisis that is missing? and my overplaying the problem of -- am i overplaying the problem of getting our arms around the situation? >> i wrote in the financial times -- excuse me, an alternative newspaper. [laughter] about how the best analysis of the vietnam war had established that the way the vietnam war happened was policymakers were presented with three options.

if you do nothing, it will collapse. if you do a, b, c, there is a process of success. a and a bit of b, you can avoid disaster in the next month. again and again and again they chose option 3 and eventually the policy collapsed around them. that is the product -- a process we have been witnessing in europe for the last two years. the challenge is to break out of that kind of approach. pieties about fiscal rectitude have the virtue of being right. there needs to be more fiscal rectitude. one should not confuse actors

with sufficiency. they are not sufficient given or the situation has gotten to stabilize the situation. contrast to these financial experiences. the swiss have spent the next to no money and have moved their exchange rate by 10%. they made a commitment. the japanese have spent vast sums and have achieved in negligible movement in their exchange rate. there has been no commitment. policy has been episodic and with an uncertain future. there is a lesson about the kind of ways you do and do not succeed in solving financial problems.

the doctrine about acting with overwhelming force has a resonance in the national security area. something similar is instructive in the financial area. >> that is the point wanted to make. i agree with everything larry said. i'm concerned we do not see the lesson for ourselves. our failure to act, many economists did the math two years ago on greece. i think we have a day of reckoning coming here as well. our leadership needs to be as focused on blending austerity and gross as the sermons we're giving across the atlantic. >> we have a question for zhu min. you talk about a soft landing but one of the members of the council who knows about the chinese economy asked if there is a possibility of a bubble in

real estate. could there be a hard landing there? >> he is a big owner in china. where is the bubble? >> the question was directed for you. [laughter] >> i will give you the answer. the property price is clear. it has become a problem because affordability is a big issue. things are more expensive than in new york.

where there is a bubble, if you're looking for the realtor, 15% are mortgages. the total lending is relatively low. the prices have stabilized. i would say the focus has a lot of issues and has trouble. >> other questions? >> a question for zhu min, should china increase its contribution to the imf to help europe? >> you had better ask larry. [laughter] >> i will make you this

prediction -- china will contribute substantially to any international effort where there are many other contributors and where the situation has all zero -- already been stabilized so it is unlikely that their contribution will be decisive. the best bankers always have a standard rule. they are certain to give you a loan if you do not need it. [laughter] if the situation is not realistic to expect that china will put a large amount of money into a risky european situation, just as the united states was not willing to put a large amount of money into risky situations in asia. >> you did not ask about whether

you would put more funds in the imf. china is the third largest. china also has the members contributing. they can open the bilateral credit line as well. there is a lot of pooling resources. if you hear from the emerging markets, it is clear they are willing to help. china also says they are willing to lend a helping hand but obviously a lot of details needed to be worked out. >> the probably the only italian passport holder in this room. a question for larry summers.

you said it really is too big to fail. i think it is too rich to fail. it has a lot of private wealth. it has a background in manufacturing infrastructure and has an economy. for the first time i heard the toxic word to a g-8 country. we are in a situation where things can go under control. somebody should do something. the ecb should step up their efforts but there is no willingness to go there. the question for larry summers, if you had a european passport, what would you do? what would be they guarantee, what would be needed to trigger the ecb or whoever to detoxify

the debt? >> let me say an two things. business people like yourselves suggest that economists are unworldly and a variety of respect. you are often right. let me say the single thing or business people tend to make errors in judgment. to confuse the strength of technology, the basic function of the micro economy with the health of the macro economy. in 1999, it was phenomenal in terms of technological leadership. a staggering in its dynamism.

stood out to the rest of the world. when finance was mismanaged, it did not matter very much. it is a mistake to suppose that the kind of strengths the site of italy, which are right, necessarily ensure you against financial distress. where the deal has to be is more reform and more support. what is the degree of commitment on privatisation on a five-year plan that is coming from italy? what is the willingness to look ..s to accept common european discipline over fiscal policies

in the future? what is the willingness to seed issues around various subsidies from the northern part of europe to the southern part of europe? what is the willingness to look at gold resources. these are the kinds of questions that have to be put on the table if a deal is going to be reached because, make no mistake, there are politics in the south of europe and the north, the dutch right-wing that wants to go back to the guilder is a signal of things to come.

i think the basic answer has to lie in been willing to put more on the table in return for more support. the very hard to challenge is, as you understand better than i, italy is not a single unified actor. to say that italy should put something on the table eggs the question of who can speak for italy over the next five to seven years. >> any final word? thank you, min, glenn and

>> the newly designed c-span.org website has 11 video choices making it easy for you to watch today's events live and recorded. it's also easier to get our schedule with new features like the three network layouts you can quickly scroll through all the programs scheduled on the c-span network and even receive an e-mail alert when your program is scheduled to air. there's a section to access her most popular series and programs like "washington journal," booktv, american history tv, and the contenders. a handy channel finder so you can quickly find where to watch our three c-span networks on cable or satellite systems across the country at the all new c-span.org. >> from the miami book fair international last weekend,. >> miami was center stage in the bay of pigs, where the cia came to recruit cuban exiles who participate in the invasion of cuba. after castro came into power, many of the people who didn't

like him very much fled cuba. and where they fled was mainly right here in miami. of course, the election of the first black president was a landmark that shows there has been tremendous change in american racial attitudes. had there not been that change you would have no hope of prevailing. >> the presidential debate is critical that, it's hard to relax in that situation but you've got to be calm enough where you can listen and make a split second decision with noel. do i move on? do i follow up? what do i do now? >> watch coverage from miami online at the c-span video library. archived and searchable, watch what you want when you want. >> detroit mayor dave bing says the city is in a quote financial

crisis in city government is broken. he made those comments in a tv and radio address last week. detroit has a $150 million deficit and will face a 45 million-dollar cash shortfall by june. the city -- this is about 20 minutes. >> thank you. good evening. i want to thank our residence for tuning in tonight and the media for allowing me this opportunity to address the challenges we are facing in the city of detroit. four years ago with the auto industry on the brink of collapse, workers and management faced an uncertain future. rather than continue fighting old battles, they chose to adapt, excepting new labor agreements, reduced wages and benefits, and changing the way

the are operating their business. tonight we face the same challenge and must make similar decisions. simply put, our city is in a financial crisis and city government is broken. that's not new. that's not an opinion. this is fact. i promised when i ran for this office that i'd tell you the truth, even when it wasn't pretty or popular. the reality we are facing is simple. if we continue down the same old path, we will lose the ability to control our own destiny. for decades the city has refused to face its fiscal reality. we cannot continue to operate that way. without change, the city could run out of cash by april with a potential cash shortfall of $45 million by the end of the fiscal year.

city government has to work within a budget. and like you, we've tightened our belts, and our spending, and try to do more with less. we've eliminated approximately 2000 positions since i entered office, but with the bills continuing to pile up and core service suffering, it is clear that we have to do more. residents are frustrated and i understand why. i ride around in our city and i talk to people every day. i received your letters, i receive your calls and your e-mails. you want a safe city. you want officers on the street. you want fire and ems services that have the resources to respond quickly when you call during an emergency. you expect the city's street lights to be on to keep you safe

from criminals, and you needed a system that you can rely on to get to work, to school, and to the doctor on time. those are all reasonable expect nations of city government, and they are expectations that haven't been that for far too long. i refuse to do what's been done in the past. i refuse to sugarcoat the situation or continue kicking the can down the road expecting someone else to solve our problems. i stand before you tonight to outline what we are doing to address your concerns and ask for your support in this effort. let me make one thing perfectly clear. i don't want and emergency manager making decisions for my city. [applause] i'm your mayor and i want to continue to lead the city back.

i'm going to tell you what we're doing to get buses up and running. i'm going to tell you what we're doing to doing to turn the lights on, and keep our city safe. and i'm going to ask for your help to push for the reforms, tough choices and structural changes we need to control our own destiny. [applause] with less revenue coming in and service demands higher than ever, we have to shift our fiscal priorities and fundamentally restructure how city government operates. public safety is the most important service we provide. i will not allow police and fire to be guided. [applause] -- to be gutted. i will not allow criminals free reign over our city.

[applause] we need every police officer we have on the street fighting crime. i will not eliminate hundreds of our firefighting force. we depend on them to protect us and save our lives every day. [applause] hii don't want to get boots on e street but we need police and fire to accept the same 10% cut in salary that the rest of our city employees have accepted. together, the police and fire departments comprise about 60% of the city's budget dollars. adding that savings to the cuts instituted across all city departments will save a total of $13 million this fiscal year. cutting resources to police and fire is not the answer. our officers need access to technology to lock up criminals

and prevent homicides. shot spotters is a technology that has been successful in cities across the country in helping to solve and prevent homicides. tonight i am asking the council take immediate action to approve the contract, funded by grants and drug seizure dollars, to give our officers the tools they need. [applause] we are making progress on public safety. overall crime is down more than 10%. however, the most important measure of crime is up almost 20%, loss of life the homicide. it's an epidemic and we must do more to keep people safe. that's why in august i called on our national, state and local law enforcement agencies together to establish a partnership and attacked violent

crime. in less than 24 hours, that collaboration led to one of the largest drug busts in the city's history. reducing crime is a responsibility shared across this entire city. as a community, that means stepping up and talking to police when you know something about a crime. it means respecting each other and restoring the sense of community that once made the choice neighborhoods the india cities across this country. [applause] -- the envy of cities across this country. over the last few months i've heard numerous stories of people who have been left out in the street and in the dark for hours waiting for buses. too many kids are late for school, workers late for their jobs, and others are simply stranded and frustrated. we simply have to do a better

job. on a daily basis, we need 305 buses on the street to provide optimal service for residents. over the last three months, we are on average almost 100 buses short of where we need to be. i won't stand here and tell you we have the ability to fix everything in the short term. detroit has an aging bus fleet, a lack of resources for maintenance and higher demand than ever for bus service. that said, i recognize the need for immediate action. on october 19, i gave the mechanics union and ddot management 30 days to work with us to determine how to get more buses on the street. and based on hours of discussion and negotiation, i am taking the following actions. number one, effective immediately, i have a laminated furlough days for the bus mechanics. [applause]

-- is eliminated furlough days for the bus mechanics. we need every available hand working every day to get these vehicles on the street as quickly as possible. [applause] number two, effective immediately, i have instructed ddot to allow for mechanics to work around the clock if necessary to fix the buses. [applause] a 10% wage reduction will remain in place to offset the cost of this short-term solution. number three, detroit police is providing enhanced security on the buses, random checks to protect passengers and drivers alike. [applause] number four, effective immediately, i've instructed ddot to ensure that parts are available to fix the buses. and number five, we have begun

the process of selecting a new management firm. it is not, it is past time i think to bring the best practice approach of industry experts to manage our fleet. [applause] given our challenges, it would be unrealistic to expect that next month we will have 305 buses running every day. however, i will not settle for anything less than 25 additional buses returning to the street every month from now until march. [applause] while this action plan will result in immediate improvements to the bus service, the long-term issue with public transportation must still be addressed. ddot currently consumes 80-$109 in subsidies from our general fund. that cannot continue. we must find ways to be more efficient and provide that are

service. the department is set to receive 47 new emergency -- new energy efficient buses through the federal stimulus by the end of march. in 2013, we will also replace an additional 20 buses thanks to last month's federal grant announcement by the obama administration. [applause] now, new vehicles are just one piece of the long-term answer. better management is another. cooperation from our workers, city council and our residents is the final and most important piece of the equation. i will not allow our kids and seniors to continue waiting in the cold for buses, standing out in the dark vulnerable to criminals. [applause] now, this brings me to public lighting.

no department needs structural investment more than our lighting department. like a car or a house, if you don't pay to maintain it, eventually it breaks down and falls apart. we need a lighting system that works in detroit. city government lacks the $300 million in required capital investment and the know-how necessary to fix the lights. we must focus more on getting the lights on and less on who provides the service. [applause] we've begun discussions with private utilities that can afford to make the necessary investment in lighting. transferring pld responsibility to a private entity is the long-term solution we need to provide to the residents in a well lit city. in the short term, city council approves my proposal to get 5000 lights back on in the next three

months. but let me be clear, this is only a temporary fix, not the long-term solution. we cannot fix all the lights out in every neighborhood. our focus right now is repairing lies in the residential areas where the majority of our population lives. we have contracted with dte to replace 3000 lands in dense areas. and pld staff is focusing on fixing the grid system that supplies an additional 2000 lights across the city. given our fiscal crisis, spending money to fix lights, get the buses running and maintain public safety requires sacrifice in other areas. we have to make choices, and there is no way to avoid that reality. if we don't, we know the risk. none of us want financial decisions being made by a state appointed emergency manager.

avoiding that fate name supporting change and sacrifice that won't be easy. [applause] the city will face a $45 million cash shortfall by the end of this fiscal year if we don't make structural changes. today, i released to the public a new financial report showing our cash flow and what will happen if we fail to take action here it is available for anyone to see, with a full explanation and summary on our website, detroitmi.gov. i encourage our residents to scrutinize that report, ask us questions and start a true dialogue about our options. last week i met with her union leadership to discuss what the city needs to avoid running out of cash.

we presented this information and asked for the following. number one, elimination of furlough days for all city employees with implementation of a 10% across the board wage cut. number two, changes to existing health care coverage, including a 10% increase in employee contributions to their coverage. number three, pension reforms that will make the city more competitive with other men visible plans, including reducing excess payouts from the system. number four, reform our work rules that will reduce overtime and streamline our operations. and number five, additional strategic layoffs will also be necessary given the city's fiscal position. together, these five concessions

represent a savings of more than $40 million for the fiscal year. i know that accepting sacrifice is difficult for our city employees. i know that government has gone to the unions time and again asking for concessions in tough fiscal times. but at no time have city services suffered so much as they are today. residency deserve more than reduced services and high taxes. -- residents deserve more than reduced services and high taxes. [applause] we simply cannot afford to provide the rich benefit packages that our employees have enjoyed for decades. this is not an attack on labor or our dedicated employees. the private sector, including the auto industry, was forced to accept tough cuts just to survive. the terms would ask for are no

different than what most detroiters received at their places of employment. we are asking for the same partnership with city retirees. if detroit's 22000 retirees except the same medical and pension reforms, the city will save an additional $8 million in this fiscal year alone. in addition to labor and concessions, and strategic workforce reductions, we will implement the same 10% reduction in pay for city contractors. effective january 1, we will also implement a tax rate increase of less than 1% for corporations in detroit. if we are asking our unions and our contractors to sacrifice, it is basic fairness and common sense for the business community to contribute as well. [applause] i'm also urging governor snyder

and the state legislature to write one of the historic wrongs that contributed to detroit's fiscal crisis. in 1998, a city made an agreement with the state to lower its income taxes over a period of years in exchange for a guaranteed level of state revenue sharing funds. by the city follow through on its commitment, saving detroiters millions in taxes, the state did not keep its promise. [applause] that loss of more than $220 million in revenue is enough to eliminate detroit's current structural deficit and compensate for the fiscal years $45 million shortfall. i am -- [applause]

i am requesting the return of those funds to the city of detroit. [cheers and applause] detroit is critical to this region's economic success. and without a strong urban core, surrounded communities in oakland, wayne and macomb county, they will also suffer. if we are truly serious about competing as a region, it's time to stand together and put our collective political will and power into action. [applause] we have to make a choice. if we want detroit to succeed, all of us have to put some skin in the game. if we want better public safety, if we want more buses on the street and more lights on, we have to make the changes that

i've outlined. tonight, i am asking every detroiter and all who care about this city to stand with us and work with us to keep detroit our city. [applause] i want you to know that the challenges we're facing, i want you to know what we're doing to address them. i want you to know that i love this city just like you do, and we need your help like we've never needed it before. [applause] despite our challenges, there are many positive things that are happening in our city. our image is changing for the better. businesses in the city are investing again. people believe in detroit and want to see us succeed all across the world.

we can't afford to lose that momentum. the apathy that has paralyzed detroit for decades in the tonight. [applause] -- for decades ends tonight. all of us has something to contribute to this ever. together we need to move our businesses, our employees, our contractors and elected officials to do what is right and necessary for detroit to succeed. we must cut pension and medical costs by more than $40 million annually and continued strategic layoffs. we must provide better services at a lower cost. tonight, i laid out the steps to avoid the appointment of an emergency manager. i provided specific actions that i am taking to get more buses on the street, and thousands of street lights turned on.

i outlined what we're doing to keep the city safe. detroit has always had the will to survive. we must once again stand up as a community and work together. addressing this fiscal crisis head-on is the only way to save our city. i want to thank you for watching tonight and for all that you do and will do for detroit. this is our city and our future. goodnight and thank you. [applause] [applause] [cheers and applause] >> it was a flood. i mean, people were down there filling sandbags, trying to keep the river -- air force one

stopped. motorcade down to the flooded area, took off his jacket, my name is he fills three sandbags, said hello and hi to everyone, got back in the car, went back into playing. what was filled to the airwaves, it was reagan filled sandbags with his shirt off. >> abc's sam donaldson, nbc's andrea mitchell and former senator chris dodd talk about the legacy of ronald reagan. new york city mayor michaelf? bloomberg and arianna huffington discuss the american dream and the opportunities in the u.s., and astronaut john glenn, neil armstrong, buzz aldrin and michael collins are awarded the congressional gold medal. for the entire thanksgiving day schedule go to c-span.org. >> and the name of the greatest people that i've ever trod this earth, i draw the line in the dust and toss the college before

defeat at kearney and i say segregation now, segregation tomorrow, and segregation forever. >> for most of his life, george wallace was a hardened supporter of segregation, outspoken against the civil rights movement, the four term governor of alabama ran for president four times, and loss. one of those efforts cut short by an assassination attempt. this week on the contenders, george wallace from the governor's mansion in montgomery, alabama, live friday at 8 p.m. eastern on c-span. >> the joint deficit reduction committee announced yesterday that it has failed to reach a compromise on cutting the federal budget. the brookings institution looked at the impact that it is likely to have. alice rivlin, and member of the presence debt reduction commission, joined former congressional budget office researcher michael o'hanlon and bruce katz to outlined several methods the supercommittee could have used to prevent automatic

cuts to defense and social programs. this is about an hour and a half. >> good morning, everyone and welcome to brookings. i'm michael o'hanlon. please to be joined by alice rivlin and bruce katz talking today about the nation's fiscal future. one of us all of you in this room, probably august, it was a happier day. we drink in washington of the redskins in the super bowl, and we are dreams in washington and the country of a balanced federal budget. and a supercommittee that might come to the rest and give us great holiday cheer. first before thanksgiving with its report and then before christmas when the congress would hopefully pass a fiscal renewal bill. it doesn't appear any of that is happening, and so today we're here to talk a little bit about what happens next. and i'm sure the prospects for any small sliver of hope that the supercommittee may still be grasping on they came up in conversation but i suspect we may also be talking more about what happens next, assuming the failure of this group to produce a bill that the congress can

pass and, therefore, the likelihood of a sequestration and all that follows thereafter as the automatic spending cuts kick in and we think of what to do next. that's the context but i think you all knew the context when you can. we are grateful to have you here. the way we like to proceed, get right to it, is that i will first ask alice rivlin who as all know is one of the country's great economists and budget experts, to talk about where we stand and he was about a year ago that alice was part to deficit reduction commission's laid out some proposals on whether country might go, that have been central to the debate we've had ever since but, of course, have not yet produced the major changes in our deficit picture that were hoped for. and after alice speaks for that, bruce katz the runs are metropolitan studies program will speak. and the court of the things we need to keep in mind in this whole conversation is where do we need to invest even as in general we are cutting. that's front and center of what bruce works on with his

colleagues in the metropolitan studies program. think about those areas of infrastructure, science research, education and so forth that are crucial to economic recovery where more spending actually be needed, or at least won't have to be very careful about how we got if we're going to be watching out for our country long-term economic interest. then it will speak, taking off a moderator hat, speaking brief as a panelist about the defense budget. then after exchange with each other we will go to you. so without further a do, i'm going to thank both alice and bruce for being here, as was all of you, of course. alice, just ask you to give us a sense of where things stand. sort of how you do on this monday morning, but more generally where we need to go next? >> i feel worse about supercommittee that i do even about the redskins. one can argue that they played well and almost one. one cannot argue that about the supercommittee. i feel very badly. i think this was a huge

opportunity missed, and i believe that it has been missed and that that will be announced later today. so let me say a word about what they should have said, why they didn't say it, and maybe a bit about where we go from here. what they should have done, and had the power to do, let's get the federal budget back on a sustainable track. that would have taken going well beyond to the minimum requirement of 1.2 trillion. going day, as many of us were saying, and actually solving the problem. the 1.2 trillion does not stabilize the debt. the debt would still be growing faster than the economy can grow, and that is the definition of a bad problem. what we have to do is get the

situation back on the track where the dead is not growing as fast as the economy. we did that decades after world war ii. we never paid off the debt, we just grew the economy faster than the debt. so that should be the objective. it was basically the objective of the two commissions i served on, simpson-bowles and domenici-rivlin, and the arithmetic of this problem drives the answer. if you're going to get a sustainable debt, you have to do to big things at the same time. the curbing of the growth of entitlement programs, especially medicare and medicaid, but be nice to get social security back on a firm foundation as well, and reform the tax code so it is a better tax code. and raises more revenue. those two things have to be part of the solution, and roughly the

numbers were not 1.2 trillion, it was some combination of those two things to get to four or 5 trillion over the next 10 years. a lot of us thought that that big scenario was easier than a small one. and it certainly got a lot of attention. simpson-bowles, dominici and i testified before the supercommittee two and half weeks ago, said that but there was an enormous group, baby enormous is too strong a word. there was a big group and the congress around senators warner and campus, but including senators from both sides, a number of them, it wasn't the gang of six anymore. it was more like again of 36 that one of this kind of a solution. there was also a large group in

the house, about 100 house members aside the letter saying go big. why didn't it happen. i think there are lot of culprits here. it was the basic problem of the polarization of the parties, and particularly the extremes of the party with much of the republican contentions saying no revenues, know-how, no way. even with reform of the tax code. a very small crack in that was the to meet proposal a week or so ago, but not a big crack. and on the other side, a lot of democrats saying no changes that would affect medicare beneficiaries are social security recipients, ever. those are very difficult

positions, since actually we have to do both of them. but i think it was a failure of leadership. if the leadership, including the president, had really wanted this to happen i think they could have made it happen. but they couldn't sell it to their caucuses. they went back and tried to, and the answer was no. republicans were not voting for tax increases, not enough of us, and from the democrats, we are not voting for entitlement cuts. so, we are where we are. i think there's lots of blame to spread around. the business community could have done a better job. maybe the walkie community, well represented here, could have done a better job. but somehow we failed. the consequences i pretty serious. i think. we may not have a market meltdown because we're the only

game in town. the europeans are doing worse. would expect an equity market reaction but not much bond market reaction in the near term. we make a downgrade, but the really important thing is we missed a big opportunity to fix not only the logon problem but some short run problems. we need to extend the payroll tax. we need more, to extend the unemployment benefits. and those would've been easy to fold into a big deal, along with some other things like the so-called doc fix. now those have to be done separately and may not be done at all. so, those of you who know me know i am generally an optimist. i am not an optimist today. i think this is a very serious piece spent can i follow-up with one question, alice? some people are saying sequestration, the automatic cuts that will now kick in is really not the worst scenario,

and maybe we shouldn't sweated so much because idc i don't agree with this because you will hear me say what i think cuts have gone far enough in a few minutes, but some people will say this sets the stage for maybe a tax cut of the bush era to expire at the end of next of which might be better for our deficit situation, protects some of our entitlement, or most of them, and, therefore, things could be worse. i be so you don't feel that way. how do you respond? >> things could be worse. they can always be worse. the senator that you suggest, which is -- scenario that you suggest which is the sequestration cuts go into effect as enacted, which means account by account, a mindless way to cut anything, whether defense or domestic, and heavy on discretionary spending, annual appropriations, which have already been capped. so no, i don't think that is a

good idea. and there will be other chances because the bush tax cuts to expire at the end of 2012, not 2013. and that would be another moment in which maybe people get together and say do we really want this to happen? but there's no indication at the moment of a consensus on what to do in the face of any of those things. >> bruce, that takes us to you. perhaps are no happier news, but still you have watched a number of programs that you are expert in, already take some hits and a one had you feel about what's likely to ensue here after? >> yes, i think my perspective is partly washington-based but partly from someone who is spends most of their time outside of washington, and you know, my sort of start up this morning saying how do you feel? i mostly feel as exhausted. i was at the west coast twice last week, back and forth, we

know, sever cisco and somewhere in between ended up in lansing. so i would say that as i talk with political corporate civic university labor and environmental leaders, the normal course of my job, i would say they have sort of several views about the process underway here. ivc they are deeply concerned and worried about the impasse. i would say frankly that even more frustrated with washington because they don't see the conversation about debt and deficits are fine with what they know needs to be achieved here. we just have to remember a few salient facts that should bounce this conversation. we lost 9 million jobs during the recession. we barely regained them, about 24, 25% of them. the hamilton project has put out

a statistic which will say we need about 12.3 million jobs to regain the jobs we lost and then to keep pace with population growth and labor market dynamics. we do a monitor of the economic performance of each of the top 100 cities and metropolitan areas and unit states every quarter. only 16 of these metropolitan areas, two-thirds of our population, three quarters of our gdp, only 16 of these metros have regained half the jobs they lost during the downturn. so when i'm out around the country, what people are focused on is growth, as well as deficit reduction. they fundamentally dvd that the federal government has to get its fiscal house in order, at the same time they believe that we have to set a platform for the next generation, of growth. and, frankly, it's not likely, the growth we had pre-recession which was highly characterized i

consumption and overleveraging and innovating the wrong things. so i would say their perspective is threefold. first, we've got to cut but we've got to cut too fast it would got to begin to invest in those things that are going to set our economy on a different path forward. substantial sustained investment in advanced research and development, basic science. we do it to some extent in health obviously. we do it with defense. we have not invested in clean energy are anti-to the extent that we need to do to crack the code on clean energy. we need to invest in advanced manufacturing. once we invest in basic science, we need to be much better about commercializing innovation and doing tech transfer. so we don't just have the ideas in the united states, we begin to prototype projects and began, frankly, to produce and deploy,

manufacture more of what we've been. and, finally, we need to invest in next-generation infrastructure, transportation and energy, and in human capital that we need to set off this new generation of growth. so we need to cut to invest. i was on this panel in palo alto the other day with former secretary of state george shultz took his recommendation, which sounded eminently feasible, or possible or intelligent, maybe not feasible, would end all the tax subsidies for every kind of energy source that we have. whether it is oil, coal, nuclear, wind, solar. and hit a good portion of that fun into the kind of events r&d that we need. simpson-bowles had an interesting recommendation. i thought about a cut and invest committee so that as we begin to scale back the federal government, we still retained these investment. so first thing, i think state and locals are focusing on, cut

and perform. so you mentioned the cuts that have already happened. i was chief of staff chief of staff of department of housing and urban development, spent a great time there at the beginning of the obama administration. last fiscal year the communities on the block grant was cut $900 million. this fiscal year, just the package that was just approved the other day, head, d.o.t. and commerce, was cut another $200 million. the public housing program was cut $750 million. the cuts are already happening. what's not happening is the reforms that need to occur in these highly prescriptive, highly bureaucratic, highly top 10 programs so that you can do more with less. just think it's all going to be fine, or present of these programs are functioning

effectively and efficiently. they are not. these are legacy programs that haven't been reform for quite some pretty. i think simpson-bowles talked about 40 for job training programs across multiple agencies, 105 separate programs on science and engineering. federal government needs to radically get its act together on the fiscal side and the problematic site, less on about what i think the states and locals want to hear, and i've got a recommendation from maybe two, cut and evolve. alice wrote a book 20 years ago called reviving the american dream. if everyone does anything when they leave this place, go to the brookings bookstore and buy this book. it is as relevant today -- it is more relevant today in some respects than it was 20 years ago. and what it basically says is we need a new division of responsibility between the national government and the state and local governments for the 21st century. the federal government needs to

do less, and needs to do it well. the states and their cities and metros are need to take on the productivity in, the income enhancing agenda. and we have prime responsibility for some of the economic growth that needs to happen. because it's so different across the country. again, i was in reno on monday in lansing on wednesday, and palo alto on friday. these are three radically different economies and it's hard to imagine a federal government being smart or strategic enough in any century to deal with those kind of differentiating economies. let the cities, that the metropolitan areas have prime responsibility for that part of the domestic agenda. let the federal government began to scale back, literally what it does, but do it well. so i think there's an enormous amount of concern out there. there's it frustration of the. mayors, governors, these folks

are just goober pragmatic about things. i mean, partly because they wake up every day, there are constant supermarket by someone, what have you done for me lately. i think as we go forward out of this wreckage, i really hope that we begin to set up some different vehicles, not just what deficits are reduction but growth strategies where the congressional class, the federal political class begins to go federalist. bring into governors, bringing the mayors, then get stuff done. let them sit on some of these committees and tell everyone about this level what they have done in the state to balanced budgets and get their economies moving together. i think it would be a breath of realism and a breath of realism and depressive pragmatism to have chris christie and andrew cuomo said in some of these sessions and began to help, what is it, a truly hyper divided governing class in this town to

begin to get its act together. >> one follow-up. since you are saying that localities and states could do more and the fed could do less in some areas, that raises the obvious question, how much in federal spending on domestic discretionary accounts be reduced? i realize you don't have necessary detail final and are forced today across the entire government, but nonetheless the question is germane with the sequestration taking him. and i guess my question is, do you feel that sequestration is going to go too far, or do you do it is compatible with what he just laid out? if, in fact, the fed should do less is it okay that a 10 or 20% real cut occur in and you budget for domestic discretion? >> well, the kind of remaking federalism i'm describing also requires you to make tax cuts and how much can get raised at the state and local level. and i think that has to be sorted. it's not just about the cuts in

revenue remains the same. we have to really be passionate resource this out, major structural way. you can cut down, you can cut smart. sequestration sounds to me across the board as a cut down strategy. it just as everything must be working the same. same effect, same efficiency, just cut across the border again, when you think about what the federal government does with the perspective of the growth in both the near-term to create jobs, long haul to restructure the economy, there are certain programs that are absolutely fundamental for that are that really not only should be protected from cuts, but, frankly, should be put on steroids. i'll come back to the one i did, clean energy r&d but i think nih probably gets about $30 billion

now national science foundation probably gets 7 billion. i think 3 billion. rpg which is the department of energies are itchy shop gets $180 million a year. it's not only are in the investment of clean energy. we still have a national lab. we should be at 15, 20, $25 billion a year in clean energy r&d if we're going to crack the code of low carbon and be the vanguard of a clean energy revolution. if we don't do it, china will. or germany will, or they will do it in some combination. so sequestration to me, when you really are focusing on the growth trajectory this country needs to be put back on, it's absolutely no sense. it doesn't taste in which between apples and oranges and bananas in terms of what gets your economy functioning. >> i agree with that.

but i think there's one thing that many people, including many in the ones of the mayors and governors you were talking to, especially the democratic ones, think there's some conflict between jobs and growth and deficit reduction. they are wrong about that. and that has been one of the impediments in getting an agreement. and even the president has talked about everything from deficit reduction to jobs. and he's going to lose, unfortunately, the opportunity for some of the job growth that could have been folded into a larger deficit reduction deal. because we will not go in the long run as long as our debt is rising. >> absolutely spent and while you are buying books, i'm going to ask that you are getting two for the holidays, get alice's book and buy my new book, which is called the wounded giant, and

it's about america's armed forces in the age of austerity and i want to talk about a couple of the i just edited there. but related to today and the likelihood of sequestration, let me summarize and begin by saying i think sequestration would be a nightmare for our national security. and i hope very much that if indeed it takes and it will be quickly superseded by subsequent action in 2012 so that we don't start to see the kinds of cuts that would otherwise be necessary. there's some talk out there including by one of the republican presidential candidates that the kinds of things that are now happening are not real cuts. that's wrong. real cuts already happened to defense as a consequence of the august deal, and the first trench of reductions that was mandated by the august provisions of this deal. that was going to result in about 400 million in 10 years savings, or according to the cbo baseline, which is sort of the steady state, just a within inflation, 350 billion reduction over 10 years.

in other words, we are 350 billion global would be need to keep up with inflation already before sequestration. then you add on the cuts from sequestration, roughly another half trillion dollars over 10 years for the military, and you wind up with an annualized budget that is about 20% less than what it is today. but it's actually even more reduction because i haven't included more costs in any of this discussion. the war costs are assumed to come in anyway. they are therefore not savings that the pentagon can claim to justify or satisfy its requirements for deficit target. and as appropriate. we should be make our decisions on war and peace based on the merits of the kicker at the pentagon shouldn't be claiming credit that that's another $109 that will result each year by the time we are facing our way out of afghanistan by 2014. so in other words, you see total defense spending bill from summer in the range of 700 billion a year the summer in the range of 500 billion a year.

i think most of that is okay. the war costs can and should come down, not right away. i was just in afghanistan last week and i think we'll need a couple more years of very sustained effort. the president has a cut and 60,000 troops at the end of next summer from our current level closer to 100,000 i think that's okay. i think we have to we have to stay a 68,002 the following year to do the job right and then we can accelerate the cuts further. so by 2014 we're down to a modest number. i think that is doable. and the good news is we are going to see, therefore, additional reductions and more spending each year. and by 2015, hopefully, we're down to a very modest level. we will have saved over 100 billion in annual were budget by that point. maybe even 150 billion relative to last you. that's how it should be. on top of that i think the base defense budget, the core, the peacetime military establishment can get smaller and get smarter and more efficient. but let's bear in mind the

constraints under which this has to happen. president obama, senator clinton and secretary panetta have all been in east asia recently, all heaven and is going to each and every turn that we are there to stay, in fact whether to stay more than even people appreciate it before the trip and were not going to cut our military presence and we are aware that north korea is a still a very severe threat. and china while a promising rising power is nonetheless a rising power. rising powers are dangers whether they want to be or not. it's almost in their dna. i don't want to do a bob kagan invitation to which appear but bob would make this point adequate in history, anytime a country rise the way china has it is tempted use its new resources and capabilities and push others around and a sort it's a. i don't anticipate or favor a conflict with china. it's very important that we stayed robust to engage in the region with our allies in order to sort of constraint china's growth in a constructive direction. i think the strategy is working. we would be foolish to pull back

now just because our deficit problems have let us to feel that we can't sustain the. we have to find a way to be active in asia but to a more economically and anymore brutally efficient way. and there are ideas out there to do this. i would just give you one very quickly which i wrote about last week in the newspaper as well, which is the idea that i think today's navy, need to do something that most sailors don't like, which would be challenging, and which some of my colleagues at brookings has taught me is harder than i want to believe. but nontheless, i think is doable. is the idea of having crews share ships. let me explain. today, a ship is prepare in america for deployment. that -- they sail across the ocean. they go on station in the persian gulf or the western pacific. they spend about four months there and they turn around and come back and it is another month in khamenei.

meanwhile, because we always want to have one ship of a given type in either the persian gulf or the western pacific, we have to send another ship out, and there's an overlap in their diplomas because the one is getting out before the other turned around comes back to maintain continued presence. the bottom what is unique for our five ships in the fleet to sustain one on station the way we do things today. what i would submit is the navy needs to do what it already has proven to be feasible, what are because with minesweepers complete this ship forward deployed for one to two years, fly the crews to replace each other and then they share a ship back home as well to train. if you do this you get a lot of savings in the number of ships needed to sustain that one on station. i don't want to push the idea too far because there are other reasons you need a -- you might lose achieved in a future war for example. and attrition reserve is necessary when you do this rotation policy or not. right now the navy is out there saying we've got to at 30, 40

ships to the fleet. relative to the current size of 284 major ships in order to sustain our global presence. that's not going to happen. earth to navy, it's not going to happen. we need to find ways to be more innovative and creative. with this kind of an approach you can go below 284 ships and still sustain the kind of presence we have. i don't say that in order to be harsh on the navy. they are doing amazing things and i admire them, as we all do. the point is that even taking these $400 billion, or $350 billion in 10 year cut and got to do the kind think i just mention which will be uncomfortable, difficult and challenging for the services. that are parallel ideas and other parts of the military. i won't go into detail. i would just mention one more in passing. ..

one war plus two substantial stabilization missions where the united states is one of several or many participating countries where the mission could last a long time and this would be afghanistan post 2014. it could be syria or libya or yemen depending on how things go fifth cashmere becomes another flash point for the dormant between india and pakistan we could wind up with a

stabilization of mission there to prevent nuclear war and south asia. i won't go into the details but we have to have the ability to respond because these kinds of missions are potentially important and potentially beyond our ability to prevent a little we would like to see them or not and therefore my approach is a pretty brutal change in mood has been seen as conservative force planning. instead of two major regional wars we are on one plus two, one plus two stabilization missions and maybe the army and marine corps shrink below where they were in the clinton years as a result but even if you do that you can't shrink them to a small level because the world is still dangerous and some of the country's stalled nuclear weapons or the potential for a nuclear weapon the potential to provide some juries and transnational terrorism we can't just push them away because we are tired of being engaged overseas so what i'm trying to do is strike a balance and i will round up on this note we have got to be brutally proficient and creative in how

we challenge traditional ways of operating to people to tax the court interest less cost. let's not pretend we can wish we those interests or the mission and the western pacific and the persian gulf which already received most of our military tension still require it. one small note of this agreement with the secretary oil gets a huge subsidy because our military projects the persian gulf and whether there's a former subsidy in the tax code or not it is a huge benefit which is one reason i agree with bruce we should be increasing r&d in the queen energy because the orioles is getting a subsidy and in fact at least $50 billion a year because of that military protection for the location where two-thirds of the world reserves are located but we can't wish away the fact the persian gulf still has two-thirds of the world oil reserves and the clean energy is not quite yet ready for prime time across-the-board soviet interests, we can try to be more

efficient in how we protect them. i think there are ways to do that to save over the next ten years i see no way to do that if you have to double the savings and double the cuts and therefore adamantly i'm opposed to the sequestration and i hope this either doesn't happen somehow or that it is quickly superseded by 2012 congressional action to read with that i'm going to turn to my fellow panelists to see if they want to add anything at this juncture and ask you to prepare your questions for us, any comments. >> let me just ask a question about the effect of the end of the war wind down of the war. some military folks i've talked to said we've lost our equipment. we need to rebuild and modernize. others say we've actually done a pretty good job of modernizing

as we went and using the war funding to do that. >> i think the equipment stocks have not been public by the war because where there had been specific needs identified we try to address them for the supplemental appropriations. having said that, in broad terms even beyond the war story, the ronald reagan buildup of the 1980's provided a lot of new equipment, and as you know and i think that you were smart to do this as a part of the clinton administration you reduced defense spending and disproportionately procurement spending within that because you realize we have new equipment that we could live off for awhile and spend less on acquisition for the 1990's period and the war supplementals have done nothing to change the fact that the ronald reagan era equipment is wearing out and we can't again take a 1990 solution of simply deferring because the same six teams for a simpler

still in the fleet. in the 1990's they were 10-years-old and now they're 20, 25-years-old and we have to replace that of the supplementals did not replace the course dhaka of the military equipment. >> i think it really gets to the point of wood for hinchey gates the defense establishment perhaps from them on defense establishment celebrates of the needs of the scale as a level of planning that is going on and the use of metrics that are continuously updated to inform the kind of strategic plan. that has not happened with regard to what i would consider to be next-generation economic growth models. i mean, we still don't quite measure things in the way we need to come and we clearly don't have -- and this is something i think many of the president's council siskel four

we've noeth long-term strategic plan that had to think about a growth policy particularly given the fact that china, india, brazil, etc. are totally online. and i -- someone said something to me the other day. how many people in the audience have seen the movie money ball or have read the book? this is a book that begs the point that talks about the oakland age and how we use to measure things in baseball glove long way and intriguing character building who found a new way to measure based on the performance and apply this. i think we need to think coast recession the same way in the economy. pre-recession we focus on the recession. how many different ways can we measure housing? we measure it. how many different ways can we

measure retail? we measured it. when you try to measure exports at the local level, foreign direct investment, manufacturing and all of its complicated ways, trade and logistics, frankly we don't have the same kind of statistics that we had with regard to the consumption in the economy. so, i think from the military conversation it's not surprising in some respects, but the way in which we perfected the set of metrics, the set of performance measures and a sort of ethics of planning, which we do not have on the domestic side, and which we fundamentally need in a federalist way. >> and the man to ask you one question as we get ready to go to the audience. to give you credit and your program and some of your colleagues in the country, you have come up with certain specific recommendations and numbers. you already mentioned one today which is where use a clean

energy research could go. can you give another a sample letter it is infrastructure investment or some kind of encouragement or subsidies, tax subsidy for economic renewal in the cities or some area where you have actually done that analysis and you could highlight an example of what it could allow. >> i think this is what makes it such an intriguing period because if you think about the shift to the different kind of economy, it has enormous effect on the infrastructure building and enormous affect on the police making. if you were going to shift through a more export-oriented economy, you have to have more advanced manufacturing, industry coming and obviously more modern ports whether they are see or rail or air. and shift to the low carbon economy, you have to really think about the distribution and transmission of energy. you have to think of the innovative economy. i think what michael bloomberg is doing in new york by the kind of track of stanford or of

israel bezoar advanced engineering schools to the city sort of meeks and shows he is thinking very carefully about the interplay of the density innovation and so forth and so on. so we need a different scale of investment in infrastructure in the united states but it can't be the old style we are going to wait for the fed to rain down their favorite number, 50, 75, $100 billion. it has to be done in a public-private way. so we have been working on increasingly really with the states and the metropolitan area because nobody's waiting for the dough and waiting for anything to happen at this level it is a new style of infrastructure bank, green banks, it is a certain scale of public resources but the goal is to leverage the private sector capital expertise to deliver this next-generation infrastructure. so, it's both the size of the

resources of the manner in which resources are deployed that has to change. and again, it has to be more distributed because i think fay -- we may be injuring a century where, again, as the book really telegraphed 20 years ago with a national scale house to scale back in its ambitions and the state and local scale had to scale up. >> i have to follow up because with the broad question about what is going on at this week with a super committee to what extent is the failure of the super committee it seems likely going to fundamentally get in the way of a lot of what you are talking about, or to what extent is it just sort of one more conservation for you and the mayors and governors in this shouldn't look to washington and they will get on with their private public collaboration's more or less impeded by the break down in washington. >> the same way the markets have already assumed by the state and local leaders and i am not just talking about the governors and

mayors because of the state and local level it is really governance in the side of government. everything is sort of co-produced by the political university labor and so forth. they've only presumed dysfunction in washington. and they already are changing how the function. i will just give you one example, which will sweep across many areas of domestic politics. transit. if you want to be a 21st century of multiple listing the date on the first century transit system interplay of the commuter rail and the light rail and rapid and so forth and so on to connect the hub and all the rest of it. in denver they are building the largest light rail system in the united states primarily funded with local money. in los angeles they are dramatically extending out their transit system which smartly in use and zoning primarily

financed by local revenue sources. they moved on. i mean, they are not expecting washington to get its act together. they know to compete globally they are going to have to make the kind of investments with their states and with their private sector to do so. they just want assad what just a level of reform at this level so that their presence and prominence in the global economy can be recognized and build on. >> but none of this great stuff, which i totally agree with is going to happen if we have another recession coming and so they should be keeping in mind if we don't get on top of this problem we will be precipitated into a new recession. we don't know a exactly win, but we could, instead of gradually falling out of this one be in a

decade long slump there would be much worse and that would preclude just about everything. >> it is absolutely right. this is why it is so critical to make the connection between the macroand the metro function because i do think that the metro area and other states are aware you have the policies of the united states code in the public and private and pacific sectors, but you lose sight of the macroand the platform doesn't exist to get this done. >> thank you. please wait for a microphone and then identify yourself and we will start here in the fifth row. then when you ask a question please call if you could direct it to one of us if it is clearly for one of us if you can. >> retired submarine officer. i agreed in principal with your comment of the deployed shift,

however having made the tentacles with two complete cruce per ship per deployed on a see a problem in the surface navy. a lot of ports don't let the nuclear shift and and in each of the areas you need to have a port where refueling, bringing aboard as well as shifting the crew and i see some problems with what you are saying. i like it in principle and we have done it with the wind sweeps and the storm class, but i don't think it will work at the aircraft carrier level. >> thank you. i agree the aircraft carrier case is a different one and i should have clarified my recommendation would start with major surface combatant as a major next area of emphasis just for those of you who are not submariners or naval officers, and don't follow this stuff as much there are about 300 people

typically on the combatant, a destroyer or cruiser so that is a classic schiffner this idea is challenging and difficult and again my navy and coast guard have been reminding me of this and recently i accepted very much their contention and it's going to take a while to make it happen even if we try to do it because you have to try to find the overseas process so they can do more maintenance than they have been doing so far. and as a matter i can see that smaller fraction of our maintenance will be in the american ports as a result of this may be five, ten, 15% less and that is what we are going to depend more on foreign partners so some people are not going to like that in the term of economic downturn. but the other point i would add is it is going to take three, five, seven years to get to the situation where you can do this even for the surface combatants that i'm talking about because of the issues that you are getting at and some people would probably challenge me and say even that is an optimistic time line. so the moral of the story is

again, even if you are looking for the big new ways to achieve comebacks it is going to take a while. and if you rush to much you run the risk in some programs at least contributing to the danger of recession because you are pulling back on spending perhaps more quickly in some areas than we should but on this point of view you also have to bear in mind the ground force can't be cut back because they are heavily engaged in afghanistan. so, anyway, i guess the moral of the story we can agree is it some of this happens it is going to take a weigel and is going to be hard and not something you can't just snap your fingers and make it occur overnight. >> i'm eric mitchell and i write the mitchell report and i want to make an observation which leads to a question. the observation is bruce's comment about the light rail system in denver, the situation

for which i have some familiarity. the relevance here to the question is lamm was elected governor of 1974 and talking about these kind of things and doing his best to make them happen. and it's taken 40 to 35 years to get their. so here's the question. my take away from this conversation this morning is that if you can snap your fingers and have two things happen, you'd have the capacity to cut and engage in devolution programs moving away into the state's. it strikes me that in order for each of those things to happen you would have to have a radically different kind of political atmosphere and environment than we do today because what is engaged in the cut smart devolution it seems to

me frames to start differences and perspectives about our politics. so i am interested to know what steps, but sequencing one can look at it that way do you see as possibilities and is it correct to assume that has to be like the light rail system in denver that's going to take us decades instead of years? >> i think that's a really helpful comment. here's what i would take and maybe we can accelerate some of this and you're absolutely right. it took a long time for american cities and metro's to understand the need to make these kind of infrastructure investments and it's a sort of sign of how long

these shifts to take whether it's regard to transit or the advancement factoring around the world. so a couple things that hearten me. i think the conversation coming out of the business community is quite different today than it was ten years ago. when you read the book on dow chemical were you listen to the tech company out of silicon valley there seems to be a common prescription for growth coming from these production oriented leaders and innovation leaders which get to the kind of makes i was describing before, invest smart in what matters come invest today to grow for the next 30 or 50 years and that tends to be a around innovation, r&d infrastructure and human

capital and then when all is said and done it is those three things so the fact that major business leaders seem to share the same perspective about what it will take to move forward on the platform. the second piece is the state and local level. there are obviously many partisan divides. i don't want to be pollyannas about this, but i do believe that the governors and mayors took place of the parties and collaboration and when push comes to shove, but they do is strengthen their state which come back to innovation, infrastructure and human capital tailored to the economy of the denver versus vitre door michigan versus colorado, right? so, there is a pragmatic cost

out there that this country is rich in the leadership, pragmatic nonpartisan, bipartisan leadership, and what has to happen is this in affecting the federal class which has become hyperpolarized and divide that. so, i, you know, i think structurally into things have to happen, and i think this gets to the history how innovation happens in the united states and the public realm the states are laboratories. the metros are the centers of innovation. whatever they do today the federal government will be doing tomorrow. the more even in the fiscal the extracted time we can get them to show the way forward across party lines the more likely we can repair the damage here. the second piece is what i talked about before it began to have federalism super committees

this is a federal republic. we are like germany, we are like a whole series of other countries around the world react as the these levels of government even though they fundamentally really are separate and distinct on the growth to pulling the real pragmatic innovators not just the political realm of the corporate, civic and others and that might begin the sort of feel not just he would move us forward. these cut smart, cut and devolve, these are simple phrases. they really do require the kind of profound shift polarized.

>> yes, ma'am here in the green shirt right there. >> while sequestration might be a dumb way to cut defense is very small way to do it? the recent domenici plan it calls for defense cuts that surpass och what could be cut so incurious the top line number with the process itself that's so damaging for the defense under the sequestration. >> i would rather think it is the mindlessness of the sequestration process which eventful point member holds i would hope that the details don't and that they would begin thinking about some of the things mike has talked about as more sensible ways of cutting and i will leave it there.

>> to me is the magnitude as well as the way in which it would happen. i should have linked this to the earlier discussion on scrapping the cruise on the needy. one of the problems that sequestration is they have to do so steeped in 2015 so you don't really have an opportunity to face things and you just have to do things abruptly which probably means laying people off and other things i think are risking the bond that we've established with our men and women in uniform and also more broadly with smart defense planning. but the magnitude of the 20% reduction in the annual budget in other words whenever it is today it would only be 80% as agreed by the end of the decade. that is too much. as far as i can tell, and i've got other ideas in the book and the include, for example, a reform to the military tension and health care approach not anything that would take money away from the wounded warriors and i am sure that we all agree if anything we need to do the

middle-age retiree god bless him or her served the nation or off to a new career they are earning potentially great and they are still getting a very generous military pension meanwhile the private first class did two tours in iraq and afghanistan and the military gets no milledge rim pension whatsoever i don't like that system and they need to make it more fair and more economical and spend less on the free and is it really right to not see anybody in uniform to the extent of their benefits protecting every other entitlement at the rest of the country enjoys and so it is one of fairness during budget reduction when you have a sense of shared sacrifice and so it really troubles me up target defense and bruce's budget and leave see essentially untouched the entitlement and tax policy that is unfair and it's not a

short to delete a smart way to shore of the national security. so every level of the sequestration. >> in the end after the proficiency and after reform the personnel of the systems out of their the real question is what role do we want to play in the world coming in or you correct that we should be prepared to have one major regional war and two other things we're doing at the time and the question of how much we want to spend on defense comes down to that in the end. there are a lot of efficiencies between here and there. but that is the big question we ought to be talking about. >> colliery and i make a full defense protecting the interest that we currently protect. i don't see -- a lot of people think we are wasting a lot of money in europe. we have only 75,000 troops and most of the places we have people the europeans have built

the infrastructure up over the years and the cost of the and there are not notably greater than being here but the same forces so you get savings by cutting back on the size of your military. the military is sized primarily for these potential regional contingencies and the western pacific against north korea, iran or in the broad persian gulf region to rely on see any way to responsibly reduce our commitment to those regions. so, while there may be more modest pace, flexible in the mediterranean we've cut back about of the mediterranean we might be able to cut back a little more, although of course we've got to watch the libya operation unfold this year where the u.s. law was nontrivial. it was a support role but nontrivial. i acknowledge there is room for debate about -- there's plenty of room for debate, but i tend to think that the interests that were defended justify continued defense and the are important. they are inherent in many ways to the global economic system and security interest. so i would stand by them and look for ways to be more efficient and economical and how

we prevent. if you have to go deeper than that, then you have to have a more fundamental revision about which interests you are willing to protect and maybe gamble more with. over here, sir. >> greg connolly with csis. i want to stick on that point for another second. there's an argument. the cuts have already taken effect. last chairman of the joint chiefs on his last day said that the 450 was across-the-board. he wouldn't have done it that we've he was in charge to read it was his last days and he was moving on. we really haven't faced the tough choices. i will give you two quick questions. we have 17 public that those, $60 billion infrastructure. we are not really tackling that. we don't have the political will to the commissaries, anyone that his honesty from cbo on in the beginning when i was there, too,

said that is a list of the entitlement program. that can be done cheaper. we don't have the political will to tackle these yet. i don't see 2012 or 2013 as a serious budget yet to start tackling. some of the sequestration is the forcing. sadly, but i guess i want your thoughts on are we still currently in business as usual? i don't see the political will on the hill to really tackle these tough issues. >> i will take it briefly and alice me what to comment as well. you mentioned, series. my recommendations essentially e eliminate them. again, i'm not going to -- you haven't read anything at vignette. again, to get to 400 billion in the tenure cuts coming in again, 350, 400 depending which baseline use was mandated by the august part of that deal. to get to that level of savings you've got to do the kind of things, greg, you're mentioning. on top of all the effort things i've mentioned today, there is not 400 billion in easy identifiable waste to just

scalpels of the defense budget no matter what some people want to go around town cleaning. there may be that much waste in the defense system which meant that it is marbled into the muscle in such a way that it is going to take a lot of effort to develop and so in the process if you have to cut in the short term you are actually going to have to make tough decisions about the key to these and about these sorts of benefits or programs or usual ways of doing business. i think they should happen. i'm in favor of the 400 billion of the cuts and not in favor of the sequestration that alice over to you. >> you are absolutely right. there are a lot of these things we've talked about for a very long time. the congressional budget office i've left in 1983, and i have a sense of deja vu. we did report on a lot of the same things as they have not happened. it's very frustrating. >> there are always analogous. you go into any state particularly the northeast and in the midwest and you have

thousands of municipalities - duplicate services, and i think what is happening in these states is the fiscal situation is so dire that the initial phase is what's consolidate services and back office and all the rest of it. people like their municipalities. they like their high schools, you know, so let's not get rid of any of that, but there is a way to drive the enormous efficiencies through this consolidation approach, and i do believe that that is going to be one of the legacies of this prolonged recession. we may call on the recovery. that out there in the country it is a prolonged fiscal recession because it is kicking in right now because the property taxes and the sort of depressed amount of demand so i think we are about to see a level of reform on the domestic side outside of

this town which is going to be quite remarkable and it's finally allowing for the politics to catch up with the evidence. >> there are elements of hopefulness and the conversation yes, sir. >> i'm from the johns hopkins university. i have one question for director michael and madame l less. for michael linen trusten this one my question is how are we going to define a stabilization mission, veazey war. are there differences in letter sending ground troops or not and also in terms of the budget preparations. my question for madam alice i've

seen reports about millionaires going to the congress asking to tax more and earlier before that said rich people have been called. why do they do that and say that and is it going to produce any affect in terms of implementing the congress decisions on the budget cuts? >> i think you raise something of a quandary. it's absolutely true that the income distribution has gotten much more unequal over the last couple of decades and longer but particularly recently when

incomes have been growing slowly if at all and lower income people have been falling behind over quite a long period and the top 1% so it's very tempting to say let's go after the top 1%. the question is held to do that. whether you have a surtax on millionaires were warren buffett's idea was actually quite limited. it was make sure that people at the highest income pay at least the average tax because much of his income is capital gains dividends and carried interest all taxed at lower rates and that seems outrageous. all of that is true, and i would be happy to see both the buffet rule and the surtax at the very

high and but it doesn't solve the budget problem. the best way to solve the budget problem on the revenue side is thorough reform of the income tax, which will allow actual lowering of the rate you could still have a surtax on millionaires, and raise a good deal more revenue in the more progressive because what the progressive some generally fail to recognize is the loopholes of the special provisions, the exclusions, etc. gove jury differentially to the upper incomes. so i favor a drastic reform of both income taxes. we had when some symbols, we had a slightly different one in domenici rivlin but the idea is the same: get rid of almost all the exclusions and deductions,

etc., broaden the base, lower the rate and you will have a more progressive income tax and revenue. >> on the one plus two concept for sizing the ground forces -- and let me emphasize this for primarily the ground forces because the navy and air force to need to think also about western pacific taiwan, korea and maritime contingencies as low as the persian gulf contingencies, where they could have operations separate from the sort of things i'm talking about with the ground forces. though one war is sort of a big reach on the war. not unlike what we've been planning for the possibility of another north korean aggression for many years. not unlike operation desert storm or obligation iraqi freedom. but i guess because i just listed several different conflicts of very different characteristics, one thing we have to bear in mind is we cannot be too precise in our image of what future demands we are going to place upon the military. we need some cushion and some

margin for error. and so when i talk about the stabilization missions and thinking notionally about a mission in which the international community collectively under u.n. authorization gets involved as part of a large multinational operation. perhaps, perhaps not, where the u.s. role is not unlike what we did in the balkans where we provided significantly one-third of the ground forces, and i am sad reading that from a place like the current operation in afghanistan where even though there is a stabilization quality to it is also largely an offensive military campaign into the u.s. role is predominant among the foreign power and so for the one war the plan focused on the most likely candidate is korea, north korea, and the possible cases as well but that is the most likely. the stabilization mission line thinking of is just one example might be let's say for example that the syrian will mean civil war becomes just that and gets

much worse, and finally let's just say hypothetically he leaves the place in chaos and at that point perhaps acting in collaboration with actors from syria itself we authorized under the u.n. auspices an international mission with the cooperation of some syrians but also with the lack of cooperation from others to go in and help stabilize the please come and that is going to be something that's not a full blown war but will be more than a classic even peacekeeping mission. that is the sort of thing that i believe we need the capacity for, not because i expect them to happen, not because i expect to move them to happen at once but because force planning has to allow the reasonable worst-case here in the second row, please. >> john from the citigroup research. just kind of wondering what the next steps are to read where do we go from here?

something that has reflected in the budget proposal and overhangs throughout the election and more panels infiltrated or is this something that is until 2012 after having the quote on quote governing mandate and this is all said in a knowledge of the president and senator reid both saying that we are not legislative. there is a mechanism is put in place and with all of that in mind what is next. >> callis, do you want to start that? >> remember the sequestration does not kick in until 2013. and i don't know the answer to the question is. i think it is going to be very difficult for the administration to put forward a 2013 budget in the face of this. i would expect no knowledge on this that they would say here is

a better thing to do in 2013 than the sequestration. the next moment i think there are too. one is there's a lot of unfinished business that has to be taken care of that could have been folded into the super committee. that includes the alternative minimum tax and the so-called dhaka fixed as well as the extension of the payroll tax and other extensions. something has got to be done about that stuff and it is expensive it would add to the deficit. that is why it is such a shame and i don't know what they will do. some things will move forward and some won't but the big moment is likely to be after the

election but before the end of the year no matter who wins on the bush tax cuts extended and if so tradition and what they get for it. >> after the election and before next year has to be the crucial one for the tax. >> you may or may not have a lame duck credit and you may or may not have to change control on the hill. >> rating from our perspective states, metro, local across the sectors it's time to enter the conversation and it's time to basically put forward what cross section come folks across both sides of the ogle would proceed as the next federalist compaq. we see where washington is going

to me and the 2012 election will not resolve back. so, what's the new -- what is the new combat clyburn it is along the lines of what allyson adjusted 20 years ago which is still on believably relevant today or whether it is at least if you are going to start cutting in this sort of across-the-board way it's completely imagine the way a whole host of the federal programs are designed and then executed by the folks who actually have to execute them. my boss henry cisneros would say every week we don't build one home in this country, right? it's all delivered through this distributed network of public housing agencies and private sector developers and the nonprofit corporate. they are the experts, they are the practitioners. we should be basically faulting the pyramid and having our

programs or policies began to surface the folks who actually deliver all of them. then is the kind of aggressive stance i think that an increasing number of leaders in this country sub national are going to have to take because they are the innovators and they are the pragmatists and, you know, i think that kind of stance actually could begin to inform the presidential debate, and frankly could inform the government that happens post on the 12th. >> i don't want to discourage you for a minute but the book that he is referring to which i agree is more relevant now than it was 20 years ago came out in 1992. bill clinton loved it but he was governor of arkansas and the first conversation we ever had in little rock was about how

great he thought my book was. his interest faded as she became president of the united states. he had a different agenda as he was presidents and presidents are generally a little weary of turning things over to the sub national government. this man in the fifth row i guess for the sixth. >> please identify yourself. >> i hate to put a damper on this maybe they are in virginia and maryland i don't see but it seems to me governors are always in favor of federalism on told there is a hurricane, too much crime, and natural disaster court ordered to stop prisoners.

everyone in louisiana the last checked the federal government was keeping the state indigenous. so i'm a little suspicious of the story now which is actually fundamentally not american. i don't mean un-american but if you look at history it isn't revolutionary so i would like to know not to mention i don't see any of this fall when the drivers of the aggregate in the long term. i think we have to remember as someone once said all of the american political fault can become they're ought to be a lot periphery held exactly [inaudible] [laughter] the conversation started the same moment to try to do something about taxes and health care? >> i disagree with the promise i think there already is a happening now in that state. it is a work around. i mean, what's going on at the metro scale and frankly in a lot

of states and it's not across-the-board. there's not going to be one place doing all these things either the state, but the understand that they have to make some tough decisions to get back on a growth trajectory and the understand that they are economies are particularly distinct. they can desire to the silicon valley but they are not. some hour advanced manufacturing platforms and i was just in nevada last week some are easily consumption economies that need to diversify, but i think that what you are going to see the next three to five years and you already have seen state after state after state is making the kind of targeted investment in those infrastructure cluster areas that relate to what they do best. it's ugly ball because as they are doing those things they are

also cutting other things so this is never perfect, but i do see a evin level of focus and discipline and with regard to a certain segment of what can be considered transformative investment happening and most of it is a workaround. they haven't gotten to the point they are just taking what has become a worker down and let's have this be the norm because that is a radical thought and it really says the last 30 to 50 years of federal expansion needs to be radically rethought not just with regard to entitlements but with regard to a whole set of discretionary programs. i think that will happen in the next -- i mean, i think that is going to happen. and at a minimum would you will see probably is a return back to what nixon did in your lease devotees and completed and ronald reagan did more which is

the block grant and the consolidation of the stream. i think that is coming at a minimum. we have so much appreciation of the special programs across so many areas of domestic policy you need to be a rocket scientist to make sense of this of the local or the state level. i mean, the legacy government cleanout is coming. but in may also shift to this much more dramatic realignment with all of the copy apiece sent about president clinton to read may move to that because people are frustrated out there. >> i hope bruce is right. but to come back to the deficit problem, remember it's not discretionary spending that is driving the deficit. it's not defense spending either. it is the entitlements and until we get on top of that, and i believe that tsunami of the retirees is going to require both the reduction in the rate

of growth in entitlement and the revenue until we get on top of that we have this thing hanging over our head that we know is going to damage the economy sooner or later. >> next question. over here on the side. mick, retired citizen. this is for bruce. it seems to me that the state and local level there are two big problems you have to be equivalent to the entitlement revenue with the tax issue that the federal level and that is public employee pensions, public education. can you address those? >> i think those are -- and again, you have 50 states which you might as well just presume are 50 different countries, and the question is then how bad are the bad habits. that is really the only issue. i was in california. real bad. california has become something

like a democracy as a house to a representative democracy. no one is really in charge any more in california. so there is everyone should read this piece that michael lewis did in a family affair recently about the overextension of california government and the crazy sort of a liability. ha mauney since is in state after state the rules are very but what you see as governors beginning to try to get a hold of the major cost drivers. michigan to take an example governor snyder was able to push through the emergency financial management all last year and is now pointing the financial managers probably to detroit and they are going to have to first and foremost deal with the pension liabilities and began to reorder and restructure.

the second issue that you mention this case were 12. k-12 is sort of a mix of need for investment but need for radical reform and what we've had literally the last 20 years is the kind of distribution or expansion of responsibilities for schooling through charters, for the public housing innovation. it's been a really interesting experience, right? we haven't had it with a good portion or a whole number of other areas of domestic policy. schooling has really been opened up in the united states but not in uniform across the united states? and so i do think what's happening at the state level is this war about how dependent. how much did we open the system? so on accountability standards, performance measures, but really

allow for a much more dramatic distribution of, you know, the approaches. saddam i don't -- i mean, the one thing about the states and the cities and the metropolitan areas, someone is doing something to pay for the kind of systemic issues that we have. they may not be doing everything across the board, but if you want to find an example of state of the art innovation, you can find it. and then the way we operate now frankly is less of a top-down society that is a bottom-up society. zero or where innovations birds a fire early through the private marketplace and for the political marketplace. premier li now as much by her social media has by traditional media. so i actually do believe that we do have a group of leaders, not been formally, but understand what their system until edges are.

there is a bunch of vanguard innovators out there, right? they are basically showing the way forward, and the fire will kind of cycle that we are in now where innovation is identified and then replicated and disseminated of almost what speed is beginning to kick in. that is probably a much more optimistic view than the washington environment which is more top down, more hierarchical, more emblematic of the 20th century them of the 21st century. so, i eat may be delusional. >> i hope i'm not. [laughter] >> okay. two last questions together and then we are going to take our responses and wrap up. in the eighth row and then the gentleman right behind you diagonally we will take those together. >> originally with cna. could you talk about assuming the failure of the super kennedy

for the unemployment insurance, tax extenders and payroll tax cuts? and then that it up. >> with the news agency the question is how big you think will be the chance for the inaction and the political this function to another downgrading from another major credit rating agency and how big all of these financial market reactions? will that be sure enough for politicians in d.c. to carry out a great bargain? would it be short enough and what will be the best timing? thank you. >> would you like to start? >> i don't know what will happen on the payroll tax extensions and the unemployment. i think there may be a majority

for extending those. it is very desirable in terms of not taking bigger risks with the economy right now and whether there is a majority of the congress understands that or not i am not sure, but it is certainly harder to do now but we have had the failure of the joint select committee to read downgrade, i think they would take a downgrade seriously. i don't think washington would and rightly so. standard and poor's and the rest of them, they don't know anything more about the federal budget than we do. they have the last downgrade didn't have much effect, the main reason being the world still believes that the u.s.

treasuries are the focus investment there is and i think we have to be even more dysfunctional than we are, and we are pretty dysfunctional at the moment to dissuade investors from that view in europe looks worse. >> there was an interesting post this morning by edward klein in about the failure to move forward with a payroll tax on unemployment because that obviously is going to have an effect on growth. it goes back to your point, the interplay of what is received as a deficit reduction in conversation and a good fourth conversation. you know, i think we are in the middle of some kind of lost a decade in the united states where the recovery is just going to be anemic. what ever happened to the private side will be sort of

counterbalanced by what happens on the public side, and that will be scaled back, and this kind of crisis is going to in my view actually generate more innovative kind of responses at the state and local level because the more growth is sluggish the more the citizenry expresses their levels of concern and insecurity of the more the local and the state political class have to respond, and they have to respond both to clean up the fiscal mess that you referred to before with regard to the pension liability and so forth and so on but they also have to respond with the clear vision for growth going forward to the job creation in the near term, broader, more productive and innovative growth for the long haul. so, in some respects, you know, this constant dysfunction of

washington is going to get the juices flowing elsewhere in the country. and i don't -- i, you know -- you can't dismiss the kind of cataclysmic kind of environmental effects. but it does send a signal to a lot of folks out there political but also corporate leader get control the 9% amendment or the prospect of its getting worse. >> absolutely to it's been on the sequestration scenario with one last closing comment of my own to link this to afghanistan, and some of you may say well, we all know even of the sequestration kicks and it isn't going to cut war spending for better or for worse, but the sequestration is going to have to look for deep defense cuts

across the board, and a lot of people are going to say that has to apply to the ground forces. the ground forces are not yet ready to be substantially reduced because we have a couple more years of sustained effort in afghanistan that i think are necessary. it is a tough operation. it's a messy place, but i'm going to leave you with two words hopefulness about afghanistan. if we stay patient. one is in the last year violence initiated by the enemy has declined 25% if we are looking at this summer early fall pergola of 2011 versus the early fall period of 2010. now, the country as a whole hasn't yet really internalized all believed that life is getting more safe and stable, and other kinds of violence like from crime may still be holding their own or grow in the world. so on that side of turned the corner fundamentally. that is a hopeful sign to rebels of the afghan army and police as i repeatedly saw and heard about all my trip last week. the afghan army and police are

getting better but they are not big enough yet. they are not experienced enough yet. they've got a lot of problems and if this were in afghanistan i would talk to them in greater detail but they do fight and they stand up for their country and they hold together the unit but they are not ready yet. we are going to need a couple more years of sustained effort. once we are done with that two or three more years we will wind up in an o.k. place in afghanistan. that is all i will say for that. probably not a great place but not a terrible place and not another land of a sanctuary, but again, sequestration gets in the way of that scenario because it cuts ground forces as well as everything else by 2013 and that is to too soon. ..

>> for data booktv starts thursday morning including thursday at 12:30.

>> earlier today the former jordanian ambassador to the u.s. took part in a discussion on the air of spring uprising and their impact on arab monarchies. he was joined by middle east scholars who also spoke about the political unrest in other countries like rocco and bahrain. this is held by the carnegie endowment and it's an hour and

25 minutes. >> my name is paul salem and the director of the carnegie beirut and i'm very pleased to be moderating this session today. this session is on arab monarchies and how they confronted or dealt with events in the arab spring or the arab awakening. we have a very distinguished panel with us. and this is part of a research project that is emerging as a carnegie paper in a few weeks, exactly on the topic of arab monarchies and the arab spring. the authors of this paper are dr. marwan muasher and dr. marina ottaway. let me go ahead and introduce them as well as our commentator for today, or jon alterman. marwan muasher is vice president for studies at the carnegie endowment in charge of carnegie middle east work here and in beirut.

he is known to i'm sure all of you previously vice president of the world bank, deputy prime minister previously in jordan and prime minister, very active in heading the reform agenda in jordan and also previously very much involved in the arab peace initiative and the israeli peace process. marina ottaway to his left is a senior associate at the carnegie peace program, has written widely on political reform, political change in the arab world, africa and the balkans and elsewhere, author of many books and studies. our commentator for today is a good friend, jon alterman. correction, his name is not jonathan alterman. it is just jonathan. it's not short for anything. jon is also publicly well-known to many of you. he is the director and senior fellow at the middle east

program at csis here in d.c.. he served as a member of the policy staff at the u.s. department of state and he is a member currently at the chiefs of naval operations executive panel and was also an expert on the iraq study group and writes widely on middle east affairs. the topic of today i am sure is on the minds of many of you from when the events in the arab world just began and most of the events seem to be in the arab republics, but it's interesting that the arab republics that got most into trouble were the republics in a sense which we are trying to turn into monarchies, trying to give power to their sons and so on. i will start right away and -- with dr. muasher and dr. ottaway will have 15 minutes each and we will have comments from jon and then go to the audience for q&a.

>> thank you paul. the idea that arab monarchies can introduce reform more easily then republican regimes is a very popular idea here in the west, and i think justifiably so. this is because arab monarchies in general, and there are eight of them, do enjoy a degree of legitimacy that is not found in republican regimes and the notion is that arab monarchies can introduce reform from above and not risk leaving power at the end of the reform process, but manage it from above. i would like to characterize may be in a simplistic way arab governments or countries into two categories other than monarchies and republics.

those who have time and those whose time is up. on those who have time i think arab monarchies for the most part fall within the categories of countries who do have some time. however, time also in my view is a double-edged sword because time can be used by regimes to argue that it can be exploited in a serious and sustained reform process that is managed from above and in such a manner go through a smooth and orderly transition, and not risk introducing great shock to the system, or time can be used by regimes to argue that since they are not witnessing the kind of process that and other arab countries that they don't have to do anything, and that's this is in my view the more worrying

and concerning issue, which is that arab governments that do have time, whether they are internalizing the notion that what is happening in the arab world is profound and that they need to use that time wisely if they do not want the state to get ahead of them in an uncontrolled way. and so, i think what the papers that will come out shortly will show us that the potential for reform in arab monarchies is still very high. in fact, with the exception maybe of the -- which does seem to be in great trouble and reform from above is becoming you know more and more difficult by the day, if the political will exists among arab monarchies and arab monarchs to

lead the reform process from above they are capable to do so. but so far, i think the paper will also conclude that why we have seen reforms in certain air of monarchies that are meaningful, so far a sustained comprehensive reform process that leads in the end to power-sharing, the serious distribution of power among the three branches of government. so far it is yet to be fulfilled. as far as we can look at countries from morocco on one side may be to bahrain on the other and other countries in between, there are serious -- there are meaningful reforms that have been introduced or at least promised with varying degrees, but none of them so far amount to a comprehensive, sustained, inclusive process that will as well as i said in the end result in serious

redistribution of power in those countries. with that, i would like to turn my attention to jordan, the country that i'm most familiar with, and marina will talk about morocco and some of the other gulf states. in jordan, the reform so far and in particular as a response to the uprisings have also so far been peaceful and not comprehensive. the king did appoint to committees, a national dialogue committees -- committee whose first objective was to introduce a new electoral law. this is something that is very key to reform in jordan and that would indicate -- and a constitutional amendment committee that ended up amending

42 articles of the constitution which have been now and enacted into law after being approved by bye bye both houses of parliament. the monarchy in jordan is not under attack, as i have indicated earlier. this is seen as a security blanket for all jordanians, of all ethnic origins particularly of these jordanian ancestry and origin but having said that, there are serious demands in the country for changes within the regime rather than demand for regime change. and these changes within the regime are demands that have so far reached you know, the king himself and the powers of the king. i need to also point out here, and that's not particular to jordan also, that they there are basically no demands in the country or a constitutional monarchy. that applies a thing to monaco

as well. as no one talks about an and that will reach, that will result in the king being constitutional monarch in britain, because the king in jordan you can argue, the kings followers are included in the constitution. so no one is talking about a king that does not have powers and in fact i think all this, other groups in jordan want the king to have powers but they want some changes to the way the system governs. there is now an increasing complaint against the role of intelligence services in the country, a role that has become way too intrusive and a role that the intelligence services are seen to be the actual governance in place and not the formal government.

there are multiple -- in jordan. people like to divide each jordanians and palestinians and point out that in fact most of that process that has been going on now are from the easter danie and, and i personally think there are multiple and this is too simplistic a division. i think just as you can talk about the easter danie is and palestinians we can also talk about the haves and the have-nots and we can talk about durbin versus rural areas and the demands vary as well from political demands calling for an end to corruption or addressing corruption, calling for rescinding the role of the intelligence services, elected governments through parliament and other such things, redistribution of power but there are also economic demands that if range from the equitable

distribution of resources to increase salaries to increase subsidies etc.. and there i think one characteristic of jordan is that there is still an ongoing debate of jordanians in the country. 60 some years after independence, the country has not yet defined who is a jordanian and there is no rational debates going on. anytime this debate is talked about, people become extremely emotional, extremely irrational about the east jordanians who feel that the easter danie and identity would be diluted by giving palestinians you know, orchard damien of palestinian origin more representation in parliament. the jordanians and palestinians see they're not fairly represented and as such, any talk about reform in the country, which must start in my view with a new electoral law,

faces this big problem of an honest, you know, discussions and definition of who is a jordanian. and any other country those who have jordanians, the nationality of the country are nationals. in jordan that is not necessarily so. legally it is the case but in the minds of people and in the electoral laws and all the legal environment, it does not suggest that people are treated in the same way just because they hold jordanian nationality. there have been important introductions made with the new political constitutional amendments. we do now have a new, or will have a new constitution to serve as the constitution. the amendments now call for an independent electoral commission, something which have proved to be an extremely effective way of entrusting them

with the minister of interior. the government now has limits as to issuing temporary laws, as to resolution of parliament, and civil liberties have been enhanced in the country. but, of course having said that, other very limited reforms regarding the king's powers, the kings basically power in the country have not been touched for the most part with the new -- and on economic reform, there has been in my view, almost no reform done since the uprisings. the budget deficit in the country has reached an unsustainable level, more than 11% before grants and even with

grants and with substantial grants from saudi arabia and from the west, the government is still over 6%. very high unemployment. the official figure is 13%. a very large public debt that has exceeded the legal limit of 60% of gdp, so the country has some serious economic rob long's and of course with the uprisings and the tendency to sort of succumb to populist demands of increased salaries and subsidies and things that the country just cannot sustain, the country is going to face you know a serious economic problem dealing with these uprisings. and there comes the issue of the gcc membership promised by the gcc countries to include jordan in the gcc, and the gulf

cooperation council. and their of course, the promise is going to be more jobs forger damien's and therefore rising -- for jordanians coming back from the gulf. lower unemployment and of course the promise of more grants in foreign aid coming from the gcc countries. but the question today in jordan, where is this membership would have not been contested at all let's say 10 or 15 years ago, today the public is questioning this membership and asking at what price is it coming? is the sort of a bribe to slow down the face of reform in the country, or what is it and why did it come now? in general i think as i said, the country still needs a long-term strategy for reform

and a constitutional amendments are an important first step but they cannot be the end of the road. and, as such, a long-term strategy needs to be developed and has not been developed yet by the government. clearly i think jordanians want the king to lead the reform process. clearly. there are no demands for the king to step aside. they do want the king to lead the process but they also want serious measures in order to do that, and they remain mixed about whether the amendments so far have gone far enough in introducing these reforms. the old habit in jordan of changing frequent changes to the government no longer works. today, people are emphasizing the king directly rather than criticizing just the government and of course the king has

indicated that in two or three years, he would like to see a government elected from parliament. that is, you know, yet to be seen because so far electoral law even with the amendments made to it, is not going to result in a political party based parliament and will not do so before sometime in the country. if that is the case, then the king, even if he wants to, is going to find it very difficult to choose a prime minister and a cabinet from parliament if it is not political party based. as such i think the onus is going to be increasingly on him to bridge the credibility gap which today is increasing between the regime and the public, rather than entrust the government with doing so in such a time when jordan will have a political party based culture

and government and sort of the onus are the responsibility on this government i think much of that, much of that challenge is going to rest on the king's shoulders in the future. let me stop with that. >> okay, thank you very much marwan for sharing with us some points about monarchies and their context in general and a lot of depth and analysis on the changes taking place and yet to take place in jordan. thank you very much and i and i turn it over to marina. >> thank you. let me start with some remarks on the reform before i looked more closely at morocco and aid to bahrain. the process of reform in a sense would be foreign countries.

we are seeing what is happening in egypt and we are seeing what is happening in libya and we are seeing what is happening in and syria. can leave a country devastated and lead to a long period of conflict before they could country settles down so that was possible for the government, we are talking about monarchies, to start introducing reforms, before it becomes so overwhelming that they cannot manage the process, it does appear to be a win-win situation for the party. the problem that we have seen is we seem to be witnessing with the monarchies at this point is that unless there is a lot of pressure from below, they don't see the incentives or at least they don't feel the pain pressure is marwan was saying to try to introduce those changes

now. you have absolute power or you have a vast amount of power. you have a vast amount of power and so one, why make your life more complicated to give away some of this by having to start containing the parliament and with organized political parties and so on. so what we seem -- what we are seeing is in many cases and this is not addressing the -- monarchies or any other government does not try to introduce reform from the top. when it's almost too late. in other words they start moving. they cannot manage the process. there is a cautionary tale here that if you look at arab monarchies now in the case of bahrain, where because of the initial response to the protest

in bahrain, the situation has come now where it seems clear to me that nothing short of a real transition for a constitutional monarchy is going to satisfy the protest. in other another words, the monarchies has boxed itself in a corner and it is becoming a question of losing much of its power and much of its rocket or if not losing its position completely. so, if you want an analogy, it is a situation we see in, whenever there is safe rights and -- somewhere that you have an early warning system, the rumblings you know of the people knowing essentially, people follow these things and know that it for long there are going to be starving people and yet nothing ever is done. unless and until the people are starving in the streets. in the same way, the monarchies

really don't move until something is happening. what is striking at this point is that there is an unwillingness or even an unwillingness to move which characterizes the gulf monarchies. there is extreme caution in the reform process which marwan has outlined in the case of jordan and i'm going to talk about in a moment in the case of morocco. all these monarchies now that they are in danger. in other words, there is no country, no monarchy, but no other global country in the arab world that is saying this is not going -- the kind of upheavals that have shaken other countries cannot take lace in my country. in fact, the signs are quite clear that that all the monarchies are very worried about what is going on in other countries.

they may pretend that everything is fine but the fact they are are extremely worried. in saudi arabia where the king of praise the population essentially for not going out in the streets and protesting. at the same time the king is taking his chances and distributing incredibly high amounts of money in various guys to the population which certainly shows that they are extremely worried about what might happen there. the other really paradoxical situation that ec is that why none of the monarchies, and particularly the the gulf monarchies, have introduced a significant reform in their countries. more and more they are reacting in other countries saying they should introduce major reforms. all the arab monarchies voted in favor of the arab league expanding syria for example. they have all come out saying they have to make changes.

in other words, there seems to be sort of an underlying theme here that the reform is necessary, but not get or not quite at home. so it is a very paradoxical reaction in many ways to what we are seeing. let me talk about countries in greater detail. first of all talking about morocco, because morocco in many ways is a very interesting example, because it seems outwardly, in morocco the king has tried to stay way ahead of the process. within two weeks, a little more than two weeks, 2.5 weeks at the starting of the protest on february 20, the king went on television and announced a new constitution would he drafted. he also began a committee to start the new constitution and he did so. the persecution came out at one

time. he gave this committee a few months to prepare the constitution. the constitution was presented to the king on time. which was probably easy given the fact that people were represented by a small committee of experts. it was overwhelmingly approved by the population. i think the moroccan government may have gotten a bit carried away when they announced that the yes vote was 98.5% with a kind of alarm bells because i don't think anything wins anything by 98.5%. but there was no doubt that the support for the new constitution was very large, because people still supported the king and the king% of the new constitution and therefore people voted for the new constitution. the problem, so essentially the

king really moved buried old way. the problem is that the constitution date was enacted. it's a very ambiguous constitution. it's a constitution that could very much lead to the curbing of the power of the king, could lead not to a constitutional monarchy or parliamentary monarchy as the moroccans call it, but could lead to a monarchy where the parliament has substantial power. this is based, but you could also very much leave the status quo largely untouched. there are loopholes in the constitution that allow the king to essentially maintain all power, most of the power in his hands. and whether or not the king is going to use these loopholes, it is going to depend on how, whether the political